Interest Rate Roundup

Existing home sales inch up in October

2011-11-21T10:01:00.004-05:00

We just got our latest look at existing home sales from the National Association of Realtors. Sales rose 1.4% to a seasonally adjusted annual rate of 4.97 million in October from 4.9 million a month earlier. That topped expectations for a reading of 4.8 million. We saw strength in most of the country, with sales up 2.1% in the South, 2.8% in the Midwest, and 4.4% in the West. Sales fell 5.1% in the Northeast.

Single family transactions led the way with a gain of 1.6%, while condo and coop sales were flat on the month. The supply of homes for sale dipped to 3.33 million from 3.406 million in September. That was equal to 8 months of supply at the current sales pace, down from 8.3 a month earlier. Meanwhile, the median price of a used home fell to $162,500 from $165,800 in September. That was also down 4.7% from a year earlier.

The housing market is showing a slight improvement in tone these days, with builder optimism and now, used home sales perking up. Strength was broad based in October, led by the core single-family market. That said, we're still talking about a low level of activity overall. Pricing also remains weak, and distressed inventory continues to find its way into the market courtesy of an ongoing wave of foreclosures.

We also have to watch the credit markets closely. The European chaos is spreading into more and more corners of the banking sector and capital markets. That could lead to tightening credit standards in the mortgage market, exactly what potential home buyers DON'T need right now.

New home sales rise as prices plunge

2011-10-26T10:02:00.004-04:00

We just got the latest data on home sales and pricing, and it was a mixed bag. New home sales rose 5.7% to a seasonally adjusted annual rate of 313,000 in September from 296,000 in August. That topped forecasts, and it leaves sales at the highest level since April. Sales rose in two of four regions (the West and South), and fell in the other two (the Northeast and Midwest).

But the median price of a home fell off the table, dropping 3.1% on the month, the third straight decline. Prices were also down 10.4% from a year ago, the biggest monthly drop in more than two years. At $204,400, median prices haven't been this low since last October. The raw number of homes for sale remained at a multi-decade low of 163,000, while the "months supply at current sales pace" indicator of inventory dipped to 6.2 from 6.6.

We continue to get mixed data on housing, with sales stabilizing at relatively low levels but home prices coming under significant pressure. It seems the only way to generate volume in an era of falling consumer confidence, tighter lending standards, and stiff competition from distressed inventory is to slash prices. And that's precisely what new home builders appear to be doing.

We have managed to cut new home inventory to the bone. So once the supply of used homes falls significantly, builders will be in a stronger pricing position. But that's a process that will take a couple of years, rather than months. If you're a home builder, you have to stay lean and mean if you want to survive.

Existing home sales slump in September

2011-10-20T10:08:00.002-04:00

We just got a look at September existing home sales figures. Total sales fell 3% to a seasonally adjusted annual rate of 4.91 million from 5.06 million in August. That was right in line with the estimates of economists polled by Bloomberg. Single-family sales dropped 3.6%, while condo sales rose 1.8%.

The "months supply at current sales pace" indicator of inventory inched up to 8.5 from 8.4, while the raw number of homes for sale dipped 2% to 3.48 million. Meanwhile, the median price of an existing home fell sharply to $165,400 from $171,200 a month earlier. That was down 3.5% from a year ago.

September was another lackluster month for the housing sector, with used home sales falling slightly and home prices slipping a bit. Tighter lending standards and ongoing weakness in the labor market are combining to cap demand, while an ongoing influx of foreclosed properties is keeping the supply of homes for sale from declining sharply. The result is continued pressure on home pricing, and a stagnant buying climate.

Housing starts rise as multifamily perks up

2011-10-19T08:33:00.005-04:00

The September housing starts figures were just released and they popped by a surprising 15%. The 658,000 seasonally adjusted annual rate of starts was well ahead the median forecast of 590,000 and the highest since April 2010. We saw broad-based regional strength as well, led by the West with a gain of 18.1%.

However, the strength was mostly in the multifamily sector, where starts surged 51.3%. The less-volatile single-family market was more subdued, with a gain of only 1.7%. On the building permits front, we saw a slide in both the multifamily (-14.5%) and single-family (-0.2%) sectors. That left permits at a five-month low, portending a slowdown in future construction. The West led with a 9% decline in permits.

Construction of multifamily properties like apartments, condos, and town homes perked up in September, helping push housing starts to the highest level in 17 months. However, permitting activity slipped and the less-volatile single-family market remains subdued. So once again, we're left with a mixed bag of news on the housing front. It will take a more vigorous rebound in the labor market, an improvement in consumer confidence, and a loosening of lending standards to really rev up the housing market's engine again. Unfortunately, those forces don't appear to be coming together.

Pending home sales dip in August

2011-09-29T09:58:00.002-04:00

The latest pending home sales figures were just released, and they showed a 1.2% drop between July and August. That was the second monthly decline in a row and it left the seasonally adjusted index at 88.6, the lowest since April. Sales fell 2.4% in the West, 3.7% in the Midwest, and 5.8% in the Northeast. Sales rose 2.6% in the South.

We already knew the new home market slipped to a multi-month low in August. Now, it appears we're seeing the same deterioration in the "used" home arena. While mortgage rates remain historically low, buyers simply lack the confidence to step up to the plate and buy homes. They're worried about losing their jobs, and rightfully so. As a result, housing continues to act like an anchor around the neck of the economy, preventing a meaningful recovery.

New home sales slump to six-month low

2011-09-26T10:09:00.003-04:00

We just got new home sales figures for August, and they were nothing to write home about. Sales fell 2.3% to a seasonally adjusted annual rate of 295,000 from 302,000 a month earlier. That was roughly in line with the average forecast of analysts polled by Bloomberg.

The number of homes on the market continued to sink, hitting 162,000 last month. That's the lowest level in the history of the U.S., and roughly 6.6 months of supply at the current sales pace (in line with the last several months). Too bad it didn't do anything to support pricing - median home prices fell 7.7% on a yearly basis and 8.7% from a month earlier. At $209,100, new home prices are the lowest since last October.

A weakening economy, falling consumer confidence, and tighter credit standards are all weighing on housing demand. New home sales fell to a six-month low in August, with declines in three out of four regions of the country. Pricing was also weak, despite there being an extremely low level of new homes for sale. That's proof positive that competition from a glut of existing, "nearly new" homes is still weighing heavily on the market. Bottom line: The hunt for that elusive, long-lasting housing bottom continues!

Existing home sales pop in August

2011-09-21T10:02:00.004-04:00

We just got existing home sales figures for August, and they were definitely better than expected. Sales rose 7.7% on the month to 5.03 million at a seasonally adjusted annual rate. That was the highest in five months and above the average forecast of 4.75 million. Single-family sales gained 8.5% while condo and coop sales rose 1.8%.

There was broad-based regional strength, with sales up 2.7% in the Northeast, 3.8% in the Midwest, 5.4% in the South, and 18.3% in the West. The number of homes for sale dipped 3%, while the months supply at current sales pace indicator of supply fell to 8.5 from 9.5. The median price of a home fell to $168,300 from $171,200 in July. That was also down 5.1% from a year earlier.

Sales of existing homes topped expectations in August, with widespread regional strength and a nice decline in inventory. That's the good news. The bad news is that these are lagging figures -- they reflect contracts signed a month or two prior. Other leading indicators of housing demand, including builder optimism and mortgage activity, point to future weakness. In fact, home purchase loan demand just fell to the lowest level since February.

Long story short? Housing isn't falling off a cliff. But it's not recovering either. That lack of a recovery, in turn, is impeding the broad economy's emergence from the Great Recession.

Starts slip in August

2011-09-20T08:32:00.006-04:00

The latest housing starts figures just hit the tape. Starts fell 5% to a seasonally adjusted annual rate of 571,000 in August from 601,000 a month earlier. That missed expectations for a reading of 590,000. On the flip side, building permits rose 3.2% to a 620,000 SAAR from 601,000. That was slightly above forecasts for a reading of 590,000.

Starts fell 1.4% in the single-family market and 13.5% in the multifamily arena. They were up 2.2% in the West and 2.6% in the Midwdest, but down 3.3% in the South and 29.1% in the Northeast. As for permits, they rose 2.5% in single-family and 4.5% in multifamily. Permits were up in most of the country -- 3.3% in the Northeast, 6.3% in the Midwest and 11.3% in the West. They fell 1.3% in the South.

The housing market continues to muddle along, with little net progress. Builder optimism, mortgage applications, sales activity and now, construction activity, all remain mired near their recent lows. In August, for instance, construction activity slipped to a three-month low -- off almost 6% from a year ago. Permitting activity was a bit better, but still a few hundred thousand units below what you would call healthy. In other words, the patient has a pulse, but it sure isn't a strong one!

Pending home sales dip in July

2011-08-29T10:01:00.003-04:00

Pending home sales dipped in July, falling 1.3% on the month. That was roughly in line with expectations. Regionally speaking, sales fell 0.8% in the Midwest, 2% in the Northeast, and 4.8% in the South. They rose 3.6% in the West.

The pending home sales figures fall into the same "lackluster" category as all the rest of the recent housing data. Low mortgage rates are simply not enough to overcome all the obstacles out there -- including elevated unemployment, slumping consumer confidence, and the fear of declining prices down the road. I continue to expect little net progress for housing in 2011, with demand remaining anemic and the excess supply of homes only gradually coming down.

New home sales slip to 5-month low

2011-08-23T10:03:00.004-04:00

New home sales figures for July were just released. They showed that sales dipped 0.7% to a seasonally adjusted annual rate of 298,000 from a downwardly revised 300,000 in June. That was slightly worse than the 310,000 sales economists were looking for, and the lowest level since February.

The raw number of homes for sale dipped against to 165,000 from 166,000 a month earlier, while the "months supply at current sales pace" indicator of inventory held at 6.6. The median price of a new home fell 6.3% from $236,800 in June to $222,000 in July. But that was still up 4.7% from a year earlier.

July was another lackluster month for the new home market, with sales slumping in the key West and South regions and pricing taking another turn for the worse. Early reports suggest sales may be even worse in August given the slump in the economy and the sharp drop in consumer confidence we've seen. It all goes back to the labor market -- If we can't create many more jobs in this country, we're not going to see a lasting rebound in housing demand. And it sure doesn't look like unemployment is going to fall sharply anytime soon.

Pending home sales rise in June

2011-07-28T10:05:00.002-04:00

New home sales have slumped for two months in a row, but pending sales of existing homes rose again in June -- by 2.4% after an 8.2% rise a month earlier. That topped expectations for a 2% decline. By region, sales were down 0.4% in the Northeast and down 3.7% in the Midwest, but up 4.4% in the South and up 6.4% in the West. The index level of 90.9 was the highest since March. Clearly, the pattern of uneven housing data continues. Sales, construction activity, and pricing are gyrating around from month to month, but making little net progress overall.

New home sales slip in June; Pricing weak

2011-07-26T10:01:00.008-04:00

We just got the latest figures on new home sales from the Census Bureau. They slipped 1% to a seasonally adjusted annual rate of 312,000 in June from 315,000 in May. That was the second decline in a row and it was slightly below forecasts for a reading of 320,000 sales. Sales fell 15.8% in the Northeast and 12.7% in the West, but rose 9.5% in the Midwest and 3.4% in the South.

As for pricing, the median price of a new home rose 5.8% on the month to $235,200. That was also up 7.2% from a year ago. The raw number of new homes for sale declined to 164,000 in June, good for a 6.3 month supply at the current sales pace.

In other news, the S&P/Case-Shiller Home Price Index dropped 4.51% year-over-year in May. That was the biggest decline in 18 months. On a seasonally adjusted basis, prices in 20 top metropolitan markets fell a marginal 0.05% between April and May.

The housing market continues to fumble around without making much net progress. Sales picked up a bit in the spring, but momentum appears to be fading again. Construction activity has increased somewhat, but it still remains well below average. Home prices are stabilizing, but not really gaining back any of the ground they've lost in the past half-century.

Bottom line: Some pundits use the term "bouncing along the bottom" to describe market conditions. I like to picture a ship caught in the doldrums. It's not as bad as being swept away in a hurricane. But it isn't going to get you where you want to go!

Existing home sales slip in June

2011-07-20T10:01:00.002-04:00

In the wake of yesterday's strong housing starts report, there was some optimism that sales would pick up as well. But did they? Not in the existing home arena. Sales slipped 0.8% in June to a seasonally adjusted annual rate of 4.77 million units from 4.81 million a month earlier. That missed forecasts for a pick up to 4.9 million and was the lowest level for sales since November.

By property type, single family sales were flat while condo and coop sales dropped 7%. The months supply at current sales pace indicator of inventory rose to 9.5 from 9.1, while the raw number of homes for sale also climbed -- to 3.765 million from 3.646 million a month prior. That is down more than 3% from a year earlier, however.

The median price of a new home rose to $184,300 from $169,300 a month earlier. That was up 0.8% from a year earlier and interestingly enough, the highest since October 2008.

It looks like a bit of a mixed bag of news on the housing front - par for the course in this market! Sales slumped to the lowest level in seven months, and the supply of homes for sale remained ample. Yet the price of the homes that did sell rose again, touching the highest in a couple of years. It's tough to see that holding up with disappointing sales volume, and the high level of cancellations. But it's worth noting.

Going forward, it's all about the job market. If we start consistently creating jobs in this country, housing will recover. If we don't, it won't. Sure it sounds simple. But it has the added benefit of being true.

Housing starts pop in June

2011-07-19T08:34:00.006-04:00

We just got the latest figures on home construction and they were strong. Housing starts popped 14.6% in June to a seasonally adjusted annual rate of 629,000 from 549,000 in May. That was well above the 2.7% increase that economists were forecasting, and it leaves starts at their highest level since January.

Building permits rose by a more modest 2.5% to a SAAR of 624,000, but that did top expectations for a decline of 2.3%. By property type, single family starts rose 9.4% while multifamily starts jumped 30.4%. Permits gained 0.2% in the single family market and 20.8% in the multifamily arena.

It looks like spring did come to the housing market ... just a little late! Construction activity ramped up in June to a multi-month high, while single-family permitting rose for the fourth straight month. Inventories of new homes are extremely lean and interest rates remain low, two factors that likely encouraged builders to pick up the pace a little.

The key question is whether this is the start of a new trend, or if we're just being set up for disappointment again. Starts and permits picked up in late 2010 and early 2011, for instance, only to fizzle out.

Personally, I'm not terribly optimistic. We're still dealing with a massive overhang of foreclosed and distressed "used" housing inventory. The economy appears to be weakening again. And the labor market is dead in the water. People who don't have jobs don't buy houses. It's as simple as that. So construction won't pick up on a consistent basis until we start creating jobs in this country.

New home sales slip in May

2011-06-23T09:58:00.003-04:00

The latest new home sales figures just hit the tape. According to the Census Bureau, sales fell 2.1% between April and May. The seasonally adjusted annual rate of 319,000 was slightly above expectations for a reading of 310,000. Sales fell 3.5% in the West and 26.7% in the Northeast; they were unchanged in the Midwest and up 2.4% in the South.

The raw number of homes for sale keeps falling. It slipped to 166,000 in May from 172,000 a month earlier. That's the lowest level in the history of record keeping, which dates back to 1963. The "months supply at current sales pace" indicator dipped slightly to 6.2 from 6.3. Median prices gained 2.6% on the month to $222,600 from $217,000, but that was still down 3.4% from a year earlier.

Signs of life in the new housing market? Not yet. Sales slumped anew in May, while pricing remained weak on a year-over-year basis. I can't say it enough: We're clearly UNDERsupplied now in the new home industry. But builders have little incentive to build with all the competition they face from nearly-new, distressed homes. That means construction activity and construction hiring will remain anemic, undercutting the economic recovery. Bottom line: The housing market will likely remain lackluster for a period of years, not months or quarters.

Existing home sales slump in May

2011-06-21T09:46:00.005-04:00

The National Association of Realtors reported on existing home sales figures for May today.

* Sales slumped 3.8% to a seasonally adjusted annual rate of 4.81 million from 5 million in April. That was right in line with expectations and it leaves sales at the lowest level since November.

* Single-family sales dropped 3.2%, while condominium and co-op sales fell 8.1%. Sales slumped in most of the country, dropping 2.5% in the Northeast, 5.1% in the South, and 6.4% in the Midwest. They were unchanged in the West on the month.

* The months supply at current sales pace indicator of inventory climbed to 9.3 from 9. That's also the highest reading since November. The raw number of homes for sale slipped 4.4% from a year ago to 3.72 million. The median price of a used home fell 4.6% from a year ago to $166,500 from $174,600. That was up 3.4% on the month, however.

Home sales remain depressed in the U.S. Sales fell to a six-month low, with transaction volume sinking or flat in all regions of the country. Chalk the weakness up to the same factors we've been discussing for some time: A lack of buyer confidence, a continued influx of distressed inventory, tighter credit standards, and a slowing economy. Buyers simply don't have the motivation or ability to snap up homes, and there is no reason to expect that dynamic to change for some time.

New home sales pop in April, inventory hits lowest level ever

2011-05-24T10:02:00.003-04:00

We just got the latest look at the new home market from the Census Bureau. Sales rose 7.3% to a seasonally adjusted annual rate of 323,000 in April from 301,000 in March. That beat economist expectations for an unchanged reading, and it leaves sales at the highest level since December.

The number of homes for sale continued to decline, falling to 175,000 from 180,000 a month earlier. That's the lowest level in the 48 years the Census Bureau has been keeping track. The "months supply at current sales pace" indicator also dipped to 6.5 from 7.2. That's the lowest since the same month a year ago. Median prices rose 1.6% to $217,900 from $214,500 a month earlier. On a year-over-year basis, prices were up 4.6%.

We got a better-then-expected pop in new home sales in April, and a continued shrinkage in the amount of supply on the market. That's something, I suppose. But industry players continue to lack confidence in future sales, and they remain extremely reluctant to build more homes. Intense competition from the used home market is the primary culprit. Until we clear the inventory overhang there, we're just not going to get a noticeable increase in construction activity or hiring. I suspect that won't happen until 2013 or 2014.

Existing home sales slip in April

2011-05-19T10:03:00.002-04:00

Existing home sales figures for April were just released. Sales dipped 0.8% to a seasonally adjusted annual rate of 5.05 million from 5.09 million a month earlier. That missed expectations for a reading of 5.2 million, and was down 12.9% from a year earlier.

Single-family sales fell 0.5%, while condominium and co-op sales slumped 3.1%. The Midwest was the only region showing a gain (5.7%). Sales fell 1% in the South, 1.6% in the West, and 7.5% in the Northeast.

The months supply at current sales pace indicator of inventory rose to 9.2 from 8.3; that was the highest since November. The raw number of homes for sale fell 3.9% from a year ago to a still-elevated 3.87 million. The median price of a used home rose 2.4% to $163,700 from $159,800 a month earlier. But that was still down 5% from a year ago.

The latest used home sales figures confirm what we've already seen in other reports. Sales remain lackluster, inventories remain elevated, and pricing remains weak. Buyers see little reason to jump into the market, given the ongoing economic weakness and concern about the future direction of home prices.

Housing starts, permits plunge in April

2011-05-17T08:33:00.004-04:00

We just got our latest look at home construction, and it wasn't good ...

* Housing starts plunged 10.6% to a seasonally adjusted annual rate of 523,000 in April from an upwardly revised 585,000 in March. That missed expectations for starts of 569,000. Building permits fell 4% to a 551,000 SAAR from a downwardly revised 574,000 a month earlier. That also missed expectations for an increase to 590,000.

* By property type, single family starts slumped 5.1% while multifamily starts plunged 24.1%. The permitting breakdown was -1.8% for single family and -8.8% for multifamily.

* As for the regional breakdown, starts fell 4.8% in the Northeast and 23% in the South. They rose 3.7% in the West and 15.7% in the Midwest. Permits flat lined in the Northeast, but fell 0.8% in the West, 5.3% in the Midwest, and 5.7% in the South.

The housing market is a little like a pet rock. You keep starting at it, expecting it to start doing something ... anything! But month after month, it just sits there. In April, for instance, housing starts once again slumped into the low-500,000 annualized range while permitting activity faded 4%. That leaves home construction in the same depressed range it has been mired in for two and a half years.

The simple reality is that we had a once-in-a-lifetime bubble thanks to easy credit, nonexistent regulation, rampant speculation, and more. The government has responded by throwing hundreds of billions of dollars at the problem, while the Fed has been printing money like mad. Yet it has all accomplished very little. That just underscores the point I've made for a very long time -- the only "cure" for the housing bust is the passage of time and lower home prices.

Pending home sales pop in March

2011-04-28T10:02:00.002-04:00

The National Association of Realtors just released pending home sales figures for March. Sales rose 5.1%, topping expectations for a 1.5% gain (though last month's result was revised down to +0.7%). Sales also remain 11.5% lower than they were this time a year earlier. By region, the South was the strongest with a gain of 10.3% on the month, followed by the West at 3.1% and the Midwest at 3%. The Northeast showed a decline of 3.2%.

Like the other housing reports we've seen, the pending sales report continues to show weakness, although conditions did improve somewhat from February. Buyers simply lack a catalyst to bid aggressively for homes, keeping overall activity subdued.

New home sales pop in March

2011-04-25T10:00:00.002-04:00

New home sales rebounded in March, gaining 11.1% to a seasonally adjusted annual rate of 300,000 from an upwardly revised 270,000 in February. That left sales slightly ahead of economists' projections, but still at a very low level. The number of homes for sale sank to another multi-decade low of 183,000, while the median price of a home rose 2.9% from February to a level of $213,000. That's still 4.9% from a year ago however, underscoring the fact that builders are having a difficult time competing against deeply discounted foreclosures and other used homes.

Housing starts rebound in March

2011-04-19T08:13:00.006-04:00

We just got housing construction figures for March. Here's what the numbers showed:

* Housing starts rebounded 7.2% to a seasonally adjusted annual rate of 549,000 from 512,000 in February. That was a little bit better than the consensus forecast of 520,000. Building permit issuance gained even more -- 11.2% to a 594,000 SAAR from 534,000 in February.

* By property type, single family starts gained 7.7% while multifamily construction rose 5.8%. Single family permit issuance rose 5.7% while multifamily permitting spiked 25.2%.

* Regionally, starts rose in most of the country. They gained 5.4% in the Northeast, 27.6% in the West, and 32.3% in the Midwest. Starts fell 3.3% in the South. As for permits, the story was similar. Permit issuance was unchanged in the Northeast, but up 6.3% in the South, 6.9% in the Midwest, and 37.1% in the West.

The housing market tried to pick itself off the mat in March. Starts and permits both bounced after a dismal performance in February, with relatively widespread regional gains. But this tired old boxer isn't going to get back in the ring for a title bout anytime soon. Tougher mortgage qualification standards, competition from cheap "used" houses and condos, and the anemic economic rebound are all continuing to pressure new home builders. That will keep a lid on construction and permitting activity for the foreseeable future.

Pending home sales climb in February

2011-03-28T10:03:00.003-04:00

Pending home sales figures were just released by the National Association of Realtors. They showed some modest improvement, with sales up 2.1% in February compared to expectations for an unchanged reading. Transactions rose 2.7% in the South, 4% in the Midwest and 7% in the West, but fell 10.9% in the Northeast. At the same time, sales were still down more than 9% from a year earlier, underscoring the fact that housing continues to struggle.

New home sales implode in February

2011-03-23T10:01:00.002-04:00

The latest new home sales figures were just released and the news wasn't pretty. To recap:

* New home sales plunged 16.9% to a seasonally adjusted annual rate of 250,000 in February from 301,000 a month earlier. That was far below the 290,000 average forecast of economists and the worst reading in the 48 years the government has been keeping track. It also comes on top of a 9.6% drop in January.

* The number of homes for sale held steady at 186,000 units, the lowest since November 1967. But the slowdown in sales caused the "month supply at current sales pace" indicator to blow out to 8.9 from 7.4. That's the highest since August 2010.

* Median prices plunged 13.9% on the month to $202,100 from $234,800. That was also an 8.9% year-over-year drop and it leaves prices at the lowest level since December 2003.

The latest home sales figures stink, plain and simple. Sales fell in every region of the country, led by the Northeast and Midwest. Overall transactions hit the lowest level in almost a half-century. Plus, home prices slumped sharply to the lowest in more than seven years.

There literally is nothing good to say here, other than that builders are responding rationally to tough market conditions by not adding more inventory to the mix. As we slowly work down the overhang of existing homes on the market, stability will return to pricing and builders will find themselves in a better place. Until then? They'll continue to batten down the hatches and try to ride these lousy conditions out.

Existing home sales slump in February

2011-03-21T09:57:00.003-04:00

The existing home sales figures for February were just released. Here's a recap:

* Sales fell 9.6% to a seasonally adjusted annual rate of 4.88 million units from 5.4 million in January. That was much worse than the 5.12 million average forecast of analysts polled by Bloomberg.

* By property type, single-family home sales dropped 9.6% while condominium and coop sales fell 10%. By region, sales fell across the board -- 7.2% in the Northeast, 8% in the West, 10.2% in the South, and 12.2% in the Midwest.

* The number of homes on the market rose to 3.488 million from 3.369 million a month earlier. That was down about 1.2% from year-earlier levels, however. The "months supply at current sales pace" indicator of inventory popped to 8.6 from 7.5 a month earlier. The median price of an existing home dipped to $156,100, off 5.2% from a year ago and the lowest going all the way back to April 2002.

After a nice pop at the end of last year, the housing market is stumbling once again. Existing home sales dropped twice as much as expected in February, with activity deteriorating in every region and across property types. While the supply of homes for sale has stabilized, we remain grossly oversupplied. As a result, home prices slipped to a fresh nine-year low last month.

The latest figures underscore the lengthy nature of the housing market "recovery" -- if you even want to call it that. We still have too many homes on the market, and too few qualified buyers willing to step up to the plate. That's keeping the pressure on home pricing. I expect these stagnant, post-bubble market conditions to persist for several quarters as we gradually work off the excesses of the early 2000s.

Housing starts tank in February

2011-03-16T08:20:00.006-04:00

We just got housing construction figures for February. Here's what the numbers showed:

* Housing starts plunged 22.5% to a seasonally adjusted annual rate of 479,000 from 618,000 in January. That was far below the consensus forecast of 566,000. Moreover, building permit issuance dropped 8.2% to a 517,000 SAAR from 563,000 in January. That also missed forecasts by a large margin. The decline in starts was the biggest in any month going back to 1984, and it leaves construction activity at the lowest level since April 2009.

* By property type, single family starts fell 11.8% while multifamily construction plunged 46.1%. Single family permit issuance dropped 9.3% while multifamily permitting slumped 4.9%.

* Regionally, starts fell across the board -- by 6.3% in the South, 28% in the West, 37.5% in the Northeast and 48.6% in the Midwest. The story was the same with permits -- they fell 1.4% in the South, 5.4% in the Midwest, 13.6% in the West and 27.8% in the Northeast.

The housing market could use some good news. But it sure didn't get it in February! Construction activity plunged and permits sank, with declines in every part of the country and in both the single family and multifamily markets. There literally is no sliver of good news to be found in this latest report.

What's going on? Why won't builders actually build homes? Because of the massive overhang of distressed, used homes! There are simply too many lenders and individual owners willing to dump old houses and condos on the market at deeply discounted prices. Builders can't compete, so they're not ramping up production. Until we clear that backlog, construction activity will stay depressed and construction employment will remain down in the dumps.

Pending home sales slip in January

2011-02-28T10:01:00.002-05:00

The National Association of Realtors just released pending home sales figures for January. Sales slumped 2.8%, slightly worse than the 2.3% decline that was expected. December's change was revised to a loss of 3.2% from a previously reported 2% gain. The weakness was fairly widespread geographically, with declines of 1.8% in the Northeast, 5.4% in the West, and 6.1% in the Midwest. Sales rose 1.3% in the South. The index level of 88.9 was the lowest since October (85.5).

New home sales tank in January

2011-02-24T10:01:00.003-05:00

The latest new home sales figures were just released. Here's a recap ...

* New home sales tanked 12.6% to a seasonally adjusted annual rate of 284,000 in January from 325,000 in December. That missed economist forecasts for a reading of 305,000. By region, sales fell 13% in the South and 37% in the West. They rose 17% in the Midwest and 55% in the Northeast.

* The supply of new homes on the market continues to fall. It slumped to 188,000 from 189,000 a month prior. That's the fewest new homes in inventory going all the way back to December 1967. On a "months supply at current sales pace" basis, we have about 7.9 months of supply on the market. That was up slightly from 7 in December.

* The median price of a new home slumped 1.9% to $230,600 from $235,000 in December. That was still up about 5.7% from year-ago levels however.

In January, the new home market didn't get much of anything done. The overall sales rate gave back most of its gains from December, while prices slumped a bit. Supply remains extremely low, with fewer new homes on the market now than at any time in the past 44 years. But competition from aggressively priced, distressed, "used" inventory continues to hamper the new home business.

My overall message remains the same: If you're looking for signs of a robust recovery in housing, you're just not going to find it anytime soon! Instead, sales, pricing, and construction activity are likely to bounce along the bottom for several quarters.

Existing home sales rise again in January, prices hit almost 9-year low

2011-02-23T10:01:00.007-05:00

We just got our latest look at existing home sales, this time for the month of January. Here's what the numbers showed:

* Sales rose 2.7% to a seasonally adjusted annual rate of 5.36 million units from 5.22 million in December. That was better than the 5.22 million average forecast of analysts polled by Bloomberg. It was also the third month in a row of gains, and it left sales at the highest rate in eight months.

* By property type, single-family home sales gained 2.4% while condominium and coop sales climbed 4.7%. By region, they fell 4.6% in the Northeast, but rose 1.8% in the Midwest, gained 3.6% in the South, and jumped 7.9% in the West.

* The number of homes on the market shrank to 3.38 million from 3.56 million a month earlier. The increase in the sales rate, coupled with the decline in raw supply, drove the "months supply at current sales pace" indicator of inventory down to 7.6 from 8.2. That's the tightest the market has been since December 2009. Median prices slumped 5.9% to $158,800 from $168,800 in December. That was also a drop of 3.7% from a year ago and it leaves prices at the lowest level since April 2002.

So do you want the good news or the bad news? That's what I'd ask anyone looking for my take on the latest housing figures. The good news is that sales rose to an 8-month high, while the glut of housing supply shrank again. The bad news is that it took fire-sale pricing to get buyers to step up to the plate. The median price of a used home in this country fell to less than $159,000, a level we last saw in the spring of 2002.

The bottom line is that housing is a price-driven market. Investors and ordinary home buyers can and will buy houses ... but only if the price is right. That makes life tough for new home builders, who have to compete with distressed properties and "nearly new" foreclosures. But it is slowly but surely clearing out the inventory overhang, and that will eventually help stabilize pricing.

Housing starts surge, permits slump in January

2011-02-16T08:31:00.005-05:00

We just got housing construction figures for January. Here's what the numbers showed:

* Housing starts surged 14.6% to a seasonally adjusted annual rate of 596,000 from 520,000 in December. That topped expectations for a reading of 539,000. But building permit issuance tanked 10.4% to a 562,000 SAAR from 627,000 in December. That was roughly in line with forecasts.

* By property type, single family activity dipped 1% while multifamily starts soared 77.7%. Single family permit issuance fell 4.8% while multifamily permits slumped 23.8%.

* Regionally, starts climbed 15.8% in the South, 36.4% in the Midwest, and 41.8% in the Northeast. They dipped 9.7% in the West. Permits rose 11.4% in the South. But they fell 5.3% in the Midwest, 27.3% in the West, and 38.5% in the Northeast.

Construction activity picked up nicely in January, with broad-based gains and particular strength in the apartment and condo markets. At the same time, future activity is poised to slump thanks to a notable downturn in permitting. So I'd characterize the first month of 2011 as a mixed bag for the beleaguered housing sector.

Step back from the month-to-month volatility though, and you see an industry that's basically going nowhere -- not really getting worse, but not really getting better either. Indeed, housing starts and permits have been stuck in a range of roughly 500,000 to 600,000 units for the better part of two years. That's nothing like what we've seen in past housing downturns, where activity has picked up sharply once interest rates fell. But that really shouldn't be a surprise. We experienced the biggest housing bubble in U.S. history, so the hangover is going to last a long time.

Existing home sales surge in December

2011-01-20T10:03:00.004-05:00

We just got the existing home sales data for December. Here's what the figures showed ...

* Sales surged 12.3% to a seasonally adjusted annual rate of 5.28 million from 4.7 million units in November. That was far better than the 4.87 million SAAR economists were expecting, and it leaves home sales at the highest rate since May.

* By property type, sales jumped 11.8% in the single-family market and 16.4% in the condo and coop arena. By region, sales gained at a double digit rate across the board. They gained 10.1% in the South, 11% in the Midwest and 13% in the Northeast, and 16.7% in the West.

* The number of homes for sale fell 4.2% to 3.56 million from 3.72 million in November. That was up from 3.283 million a year ago, however. But the strength in sales helped pushed the months supply at current sales pace indicator of inventory down to 8.1 from 9.5, the lowest since March. Median home prices dipped 0.8% to $168,800 from $170,200 a month earlier. That was a 1% change from year-ago levels.

The housing market continues to show signs of life, with building permits, confidence, and now sales perking up. Indeed, single-family sales activity shot up at the fastest pace in any month going all the way back to January 1983. The gains were widespread regionally as well, and that helped reduce the backlog of unsold homes somewhat. I credit the improved tone of the labor market, a pick up in buyer confidence, and a budding sense the worst might be over for home pricing.

At the same time, we're still talking about a market with more than three and a half million homes officially for sale. You have quite a bit of "shadow inventory" behind that, and foreclosures continuing to be parcelled out into the market over time. So I don't anticipate we're going to see consistent, large gains like we did last month. It will be more of a gradual improvement in the tenor of the data over the course of 2011.

Housing starts fall, but permits rocket higher in December

2011-01-19T08:31:00.004-05:00

We just got housing starts figures for December. Here's what the numbers showed:

* Housing starts dropped 4.3% to a seasonally adjusted annual rate of 529,000 from 553,000 in November. That missed expectations for a reading of 550,000 and was the worst reading since October 2009. But building permit issuance rocketed higher by 16.7% to a 635,000 SAAR from an upwardly revised 544,000 in November. That was the biggest monthly rise in permits going all the way back to June 2008.

* By property type, single family activity slumped 9% while multifamily starts jumped 17.9%. Single family permit issuance rose 5.5% while multifamily permits surged 53.5%. That left permits at their highest level since last March.

* Regionally, starts fell 2.2% in the South, 24.7% in the Northeast and 38.4% in the Midwest. Starts jumped 45.8% in the West. Permits rose in most of the country, gaining 3.3% in the Midwest, 43.9% in the West, and 80.6% in the Northeast. They slumped 7.6% in the South.

Last month didn't look so hot, but the future looks a lot better. That's the takeaway from the latest starts and permits figures. Construction slumped to a one-year low in December, yet builders of apartments, condominiums and houses pulled more permits than in any month since last March. The volatile multifamily market saw a huge surge, while activity in the core single-family market perked up at a more measured pace.

Bottom line: The figures point to continued improvement in housing, driven by increased buyer confidence and a gradual stabilization of the job market. But the recovery is a tepid one -- and will remain so in 2011 due to the overhang of foreclosed property, rising mortgage rates, and a "once burned, twice shy" mentality when it comes to real estate across mainstream America.

Housing starts bounce, permits fall in November

2010-12-16T08:16:00.009-05:00

We just got housing starts figures for November. Here's what the numbers showed:

* Housing starts rose 3.9% to a seasonally adjusted annual rate of 550,000 from 534,000 in October. That was roughly in line with the forecast for a rate of 555,000. Building permits fell 4% to a 530,000 SAAR from 552,000 a month earlier. That missed the average forecast of 560,000.

* By property type, multifamily starts fell another 9.1%, the third month in a row of declines. That leaves multifamily starts at the lowest since June. However, single-family starts climbed 6.9% to the highest level since April. As for permits, multifamily issuance tanked 23% while single family permits rose 3% to a five-month high.

* Regionally, starts were generally strong. While they dipped 2.5% in the Northeast, starts gained 2.1% in the West, 2.3% in the South, and 15.8% in the Midwest. Permits were a mixed bag, declining 8.3% in the Northeast and 22.2% in the Midwest. They rose 1.9% in the South and 2.7% in the West.

The latest housing report has a little bit for everyone -- Grinches and Santa Claus-types alike. Single family starts rose to a seven-month high, with broad-based regional strength. Permit issuance was relatively healthy as well. But the apartment and condominium market continues to lag, with both starts and permits falling. That leaves the overall construction industry limping into the close of a relatively lousy year.

So what does 2011 have in store for housing? More signs of stabilization. House prices are cheap again, and the labor market is holding steady. Consumer confidence is firming a bit, while lending standards aren't getting tighter anymore. But "stabilization" isn't the same as "improving dramatically." Housing and construction lack the catalysts for a robust recovery. So if you'll pardon the pun, 2011 looks to be another rebuilding year.

Pending home sales surge in October

2010-12-02T10:07:00.003-05:00

The National Association of Realtors just released pending home sales figures for October. Sales surged by a record 10.4% from September, much better than the 1% decline that economists were looking for. Sales were still down 22.4% from a year ago, however. The strength was relatively broad based with a 7.1% gain in the South, a 20% spike in the Northeast, and a 27% surge in the Midwest. Sales dipped 0.4% in the West.

Pending home sales leaped in October, with broad based strength around the country. The latest numbers contrast sharply with the lousy new home sales figures we recently got, suggesting that the used home market continues to capture the imagination of buyers. They're seeking out the best values, and right now, that means distressed used homes at attractive -- even fire sale -- prices. While I don't expect a vigorous recovery in housing, the data continues to point to stabilization. That's a definite step in the right direction.

New home sales drop in October

2010-11-24T10:01:00.004-05:00

The Census Bureau just released figures on new home sales for October. Here's what they showed:

* Sales tanked 8.1% to a seasonally adjusted annual rate of 283,000 from 308,000 in September. That was worse than the forecast for a reading of 312,000. Sales were down in most of the country, falling 12.1% in the Northeast, 20.4% in the Midwest and 23.9% in the West. They rose 3.1% in the South.

* The supply of homes for sale dipped slightly to 202,000 units from 203,000 a month earlier. That was the lowest going all the way back to June 1968. It was also good for 8.6 months of supply at the current sales pace, up from 7.9 a month prior.

* The median price of a new home slumped 13.9% to $194,900 from $226,300 a month earlier. That was also a 9.4% decline from a year ago, and it leaves prices at the lowest level since October 2003.

The new home market delivered another turkey of a performance last month. Sales fell sharply across most of the country, while home prices dropped to their lowest level in seven years. The one bright spot is inventories; the sharp cutback in home construction has left them extremely lean. In fact, they're running at the lowest in more than four decades.

But so much bargain-priced, "used" home inventory is available that the builders just can't compete. Over time, we'll work through that mountain of existing home supply. But the key words are "over time." New home builders won't have much to be thankful about any time soon.

Existing home sales slip in October

2010-11-23T10:02:00.004-05:00

The National Association of Realtors just released details on the existing home market for October. Here's what the figures showed ...

* Sales dipped 2.2% to 4.43 million from 4.53 million in September. That slightly missed the average forecast for sales of 4.48 million, and was down 25.9% from October 2009. Single-family sales dipped 2% while sales of condominiums and co-ops dropped 3.6%.

* The supply of homes for sale fell 3.4% to 3.864 million from 4 million a month prior. But that was up 8.4% from a year earlier. Measured a different way, there was 10.5 months worth of inventory on the market at the current sales pace in October, down from 10.6 a month earlier. The single-family market held steady at 10.1 months of supply, while the condo/co-op market reading dipped to 13.4 from 14.

*Median home prices dipped slightly to $170,500 from $171,500 in September. That was also down 0.9% from a year earlier.

The housing market continues to stagnate as conflicting positive and negative forces roughly offset each other. Houses are cheap again after a long period of drastic overvaluation, and mortgage rates remain relatively low. But if you're not a plain-vanilla borrower who can qualify for Fannie Mae, Freddie Mac, or FHA financing, you're having a tough time finding a mortgage lender willing to do business with you. The elevated unemployment rate and uncertainty about the future direction of home prices are also working against the recovery.

So my take? Get used to "boring" figures for a while -- relatively stable sales rates, relatively stable pricing, and relatively stable levels of construction activity. That's not as bad the freefall we were seeing a couple years ago, but it certainly isn't a robust recovery, either.

Housing starts slump to near-record low

2010-11-17T08:38:00.002-05:00

The latest housing starts figures just hit the tape and they weren't pretty. Here's a recap:

* Housing starts plunged 11.7% to a seasonally adjusted annual rate of 519,000 from 588,000 in September. That was far worse than the forecast for a rate of 598,000. Building permits inched up 0.5% to a SAAR of 550,000 from 547,000 a month earlier.

* The weakness was concentrated in the multifamily business, with multifamily starts plunging 43.5%. Single-family starts dipped a more moderate 1.1%. On the permitting front, multifamily was down 0.7% while single family inched up 1%, the first gain in several months.

* Regionally, starts dropped 13.4% in the South and 30.5% in the West. They rose 1% in the Midwest and 12.9% in the Northeast. Permits mirrored starts, with declines in the West (-0.9%) and South (-3.4%). Issuance flatlined in the Northeast and rose 14.3% in the Midwest.

The construction industry remains mired in the muck. Starts fell off the table in October, led by the volatile multifamily sector, while permit issuance continues to bounce around at depressed levels.

This should not come as a surprise. We have so many existing, distressed homes for sale already, and even more will hit the market once various foreclosure moratoriums expire. That means builders have little incentive to ramp up production, despite a stabilization in sales rates. It also means construction will not contribute meaningfully to any economic or employment recovery. Unfortunate, but true.

NAHB index rises in November

2010-11-16T10:04:00.004-05:00

The National Association of Home Builders just released its latest read on the housing market. The group's Housing Market Index rose to 16 in November from 15 in October. That's the best reading since June.

The subindex tracking present sales held steady at 16 while the index measuring buyer traffic rose to 12 from 11. The subindex that tracks expectations about future sales climbed to 25 from 23. Regionally speaking, it was a mixed bag. The Northeast index fell to 13 from 16. But the West index rose to 15 from 12 while the Midwest index climbed to 18 from 13. The South index flatlined at 18.

Housing market conditions continue to stabilize. Demand is perking up a bit and the inventory of homes for sale is gradually coming down. That's the magic of cheap homes and cheap financing doing at work.

Still, the housing market's pulse is clearly faint. The patient could easily take another turn for the worse, especially if interest rates start heading higher again and the foreclosure crisis gathers steam. In fact, I continue to believe that the housing market "recovery" will remain an anemic one, with only gradual improvement and an extremely long timeline.

New home sales pop 6.6% in September

2010-10-27T10:03:00.006-04:00

The Census Bureau just released new home sales figures for September. Here's a recap:

* Sales popped 6.6% to a seasonally adjusted annual rate of 307,000 from 288,000 in the prior month. That was better than the 300,000 sales that economists were looking for, but still only puts us back to roughly the level of sales we had in June. Sales rose in three out of four regions of the country -- by 3.2% in the South, 3.4% in the Northeast and 60.6% in the Midwest. Sales fell 9.9% in the West.

* The number of homes for sale continued to fall - to 204,000 from 206,000 in August. That's the lowest level of new home supply since July 1968. The months supply at current sales pace indicator of inventory dipped to 8 from 8.6 a month earlier.

* The median price of a new home ticked up 1.5% to $223,800 from $220,500 in August. That was also good for a 3.3% year-over-year rise.

The new home market continued to recover a bit from the summer doldrums, notching a gain of almost 7% in September. We saw broad-based regional strength, led by the Midwest, and the supply of homes for sale shrank yet again. In fact, we haven't had this few new homes on the market since 1968, the year the first ATM machine was installed in the U.S. and the Big Mac was introduced.

Still, we clearly aren't seeing a vigorous rebound in demand. Nor should we expect to any time soon. So many buyers have been burned so badly that housing demand is likely to remain depressed for years. Competition from cheap, distressed, used homes is also working against the home builders.

September existing home sales surge 10%

2010-10-25T10:01:00.004-04:00

Existing home sales figures for September were just released. Here's what the numbers showed:

* Sales surged 10% to a seasonally adjusted annual rate of 4.53 million from 4.12 million in August. That was better than the 4.3 million in sales that analysts were expecting, but it's still down 19.1% from a year ago.

* Regionally, sales rose 5% in the West, 10.1% in the Northeast, 10.6% in the South, and 14.5% in the Midwest. By property type, single-family sales rose 10% and condo/co-op sales gained 9.8%

* The supply of homes for sale dipped 1.9% to 4.04 million from 4.117 million a month prior. On a year-over-year basis, supply was up 8.9%. The months supply at current sales pace indicator of inventory fell to 10.7 from 12 in August. The median price of an existing home slumped 3.3% from a month prior and 2.4% from a year earlier.

Existing home sales surged last month, as buyers took advantage of near-record low mortgage rates and bargain-basement pricing. Another likely contributing factor to last month's strength? Any contracts signed by buyers using the home buyer tax credit had to close by September 30.

Combing through the data, you see that sales were strong in all regions of the country, with the Midwest leading the way. The pickup in activity helped whittle away at the mountain of inventory on the market. But we still haven't made much progress overall. That helped keep the pressure on prices, which fell from both the prior month and year. Longer term, we should continue to see stabilization in the housing market as 2010 rolls over into 2011. But we won't witness a vigorous recovery thanks to lackluster job growth, inventory pressures, and ongoing problems in the mortgage market.

Housing starts inch up, permits fall

2010-10-19T08:39:00.003-04:00

The latest figures on home construction were just released. In September ...

* Housing starts rose 0.3% to a seasonally adjusted annual rate of 610,000 from 608,000 in August. That's the highest since April, and above forecasts for a reading of 580,000. On the other hand, building permits slumped 5.6% to 539,000 from 571,000 a month prior. That's the lowest level since April 2009 and well below the consensus forecast of 575,000.

* By property type, single family starts popped 4.4% while mutifamily starts dropped 9.7%. The permit data showed a similar split, with single-family permits inching up 0.5% (the first gain since March) and multifamily permits tanking 20.2%.

* Regionally, starts gained 2.9% in the Northeast and 4.8% in the South. They fell 3.6% in the West and 8.2% in the Midwest. Permits were weak across the board, falling 1.5% in the Northeast, 4.3% in the Midwest, 4.7% in the South and 10.6% in the West.

The construction industry perked up a bit in September. Overall starts hit a six-month high and the single-family market in particular showed relative strength. We also learned yesterday that home builders are slightly more optimistic about the future these days. That's a change of pace for the down-on-its-luck industry.

Still, there's no any evidence of a robust recovery here. Starts remain mired in a general range of 500,000 to 650,000 units -- a far cry from the 2-million-plus numbers we were putting on the board a few years ago. Why aren't builders doing more? Because we're only slowly but surely chiseling away at the mountain of distressed "used" homes on the market. Until that supply mountain shrinks, builders won't have any reason to ramp up production. I expect construction activity and construction hiring to remain muted for some time.

Pending home sales pop

2010-10-04T10:02:00.004-04:00

Pending home sales figures from the National Association of Realtors were just released. Sales popped 4.3% in August after gaining 4.5% a month earlier. That was better than the 2.5% increase economists were looking for, though sales are still down more than 18% from a year earlier. Regionally speaking, sales rose 2.1% in the Midwest, 6.4% in the West, and 6.7% in the South. They fell 2.9% in the Northeast.

Pending sales have clearly stabilized in the wake of this summer's tax credit-driven plunge. Indeed, we saw August gains in three out of four regions, led by the South. But when you step back and look at the big picture, you realize that watching the housing market these days is a bit like watching a pet rock. You keep hoping for it to sit up, roll over, or do something. But it doesn't. It just sits there marking time.

Frankly, that's what I expect to see for the foreseeable future. We have cheap mortgages and cheap homes. Yet the conditions for a substantial improvement aren't in place, with the economy weak and consumer confidence lacking. That means pricing and sales will likely remain stuck in the mud.

New home sales flatline in August near record lows

2010-09-24T10:01:00.004-04:00

The Census Bureau just released new home sales figures for last month. Here's a look at what they showed:

* New home sales flatlined at 288,000 units in August. That was slightly below forecasts for a sales rate of 295,000 according to Bloomberg, though it's worth noting the August sales rate was revised upward by 12,000 units. By region, sales declined 10.8% in the South and 26.1% in the Midwest. But they jumped 16.7% in the Northeast and 54.3% in the West.

* The raw number of homes for sale continues to sink. It fell to 206,000 in August from 209,000 in July. That's the lowest level going all the way back to August 1968 -- 42 years ago! On a months supply at current sales pace basis, inventory dipped ever so slightly to 8.6 from 8.7.

* What about pricing? Not much happening there. The median price of a new home dipped 0.6% to $204,700 from $205,900. That was the third month in a row of declines, and it leaves new home prices down 1.2% from a year ago. In fact, they're the lowest since December 2003.

New home sales remain depressed thanks to competition from the existing home market, lackluster consumer confidence, and labor market weakness. In fact, August's sales rate is only slightly above the nearly half-century low of 282,000 set in May. Or in plain English, we're not getting any significant bounce in the wake of the expiration of the home buyer tax credit. That's pretty incredible, frankly, when you consider home prices are at their lowest level in almost seven years and mortgage rates are the cheapest in the past century.

What's it going to take to heal the housing market? The passage of time. Lower prices. Less construction. And a broad economic recovery, one accompanied by much better job growth. So far, waiting for all that to come together is a bit like waiting for Godot. We'll have to see if that changes in 2011.

Existing home sales pop in August

2010-09-23T10:17:00.002-04:00

We just got the latest read on the existing home market from the National Association of Realtors. Here's what the figures looked like ...

* Existing home sales rose 7.6% between July and August to a seasonally adjusted annualized rate of 4.13 million. That was roughly in line with the 4.1 million unit forecast of economists surveyed by Bloomberg. However, sales recouped less than a third of their 27% plunge between June and July and they remain 19% below their level of August 2009.

* By property type, single family sales gained 7.4% and condo and coop sales rose 8.5%. By region, sales were broadly higher. They rose 5% in the Midwest, 5.2% in the South, 7.9% in the Northeast, and 13.8% in the West.

* We now have 11.3 months of single-family inventory on the market, down from 11.9 a month prior. The condo market is sitting on 13.9 months of supply, down from 17.3. The median price of an existing home fell 1.9% to $178,600 from $182,100. That was up 0.8% from a year earlier, however. The raw number of homes for sale dipped to 3.982 million from 4.007 million.

It's not surprising that we saw a bit of a bounce back in the market in August, given the collapse in sales after the expiration of the home buyer tax credit. The problem is the subdued nature of the bounce. It's not much to write home about in light of the dramatic decline this summer.

What's the problem? While homes are cheap and mortgage rates low, potential buyers just aren't flooding into the market to take advantage of the bargains out there. This reflects the lousy job market and the lack of consumer confidence on Main Street. Unless the economy overall begins to improve -- and not by a small amount -- we'll likely see housing remain stuck in the mud.

Housing starts pop in August

2010-09-21T08:32:00.005-04:00

We just got the latest read on home construction, this time for the month of August. Here's what the numbers showed ...

* Housing starts jumped 10.5% to a seasonally adjusted annual rate of 598,000 units in August from a downwardly revised 541,000 units in July. Building permits increased 1.8% to a SAAR of 569,000 from 559,000. That topped analyst expectations for readings of 550,000 and 560,000, respectively.

* By property type, starts rose a relatively modest 4.3% in the single family market. They surged 32.2% in the multifamily arena. On the permitting front, multifamily permits rose 9.8% while single family permits dipped 1.2%.

* How did the regional breakdown look? Starts fell 24.3% in the Northeast. But they rose 7% in the South, 21.7% in the Midwest, and 34.3% in the West. Permits were more subdued. They fell 2.5% in the South and 5.3% in the Midwest. Issuance flat lined in the Northeast, but surged 19% in the West.

The construction industry thawed out a bit in August after an unseasonal deep freeze earlier in the summer. Led by another large gain in multifamily construction, starts rose to their highest level since April. The gains were relatively broad-based across the country, too. Permitting activity was more subdued, however, with the core single-family home market contracting for the fifth month in a row.

I've been saying for a while that the housing market is caught betwixt and between opposing forces. Housing is affordable again thanks to the combination of cheap mortgage rates and falling prices. But qualification standards are tighter than in the past, while buyer confidence is lacking thanks in large part to the lousy labor market. We also have a large overhang of distressed, "used" homes.

The result is a rather subdued operating environment for the construction industry. Starts likely won't plunge from here. But neither will they surge. We'll just be stuck in the mud for a while.

NAHB index flatlines in September

2010-09-20T10:06:00.002-04:00

The National Association of Home Builders just released its latest read on the state of the housing market. The group's index flatlined at 13 in September, compared with expectations for a slight rise to 14. The subindices for present sales and future sales were both unchanged (at 13 and 18 respectively), while the subindex that measures prospective buyer traffic fell to 9 from 10. That's the lowest level since March 2009.

The regional breakdown was mixed, with two declines, one gain, and one unchanged reading. The Northeast index slipped to 16 from 18 while the Midwest reading dipped to 12 from 15. The Southeast index ticked up to 14 from 12, while the West index held steady at 8.

The new home market remains stuck in the doldrums. That's the latest read from the NAHB. Current sales remain at depressed levels, while expectations about future sales aren't budging. Meanwhile, fewer shoppers are walking through showroom doors -- a sign that Americans by and large just aren't that excited about the prospect of buying a house. Houses are cheap. Mortgage rates are low. But the lousy labor market and a lack of confidence is keeping buyers on the sidelines.

Pending home sales climb in July

2010-09-02T09:52:00.003-04:00

We just got the latest pending home sales figures from the National Association of Realtors. They showed that in July, pending sales rose 5.2%. That compared with forecasts for a 1 percent decline, but it still leaves sales down 19.1% from year-ago levels. By region, sales were up 6.3% in the Northeast, 4.1% in the Midwest, 1.2% in the South, and 11.6% in the West.

File this report in the "At least things didn't get worse!" category. We saw a small bounce in pending home sales after two dismal months, with the index rising for the first time since April. The gains were geographically diverse, with the West showing the biggest rise. It appears the used home market cannibalized some sales from the builder market, given the fact new home sales plunged in July.

Bottom line: The news isn't terrible. But it's not great either, especially when you consider that mortgage rates are the lowest in recorded history. We should be seeing more sales with financing so cheap. The fact we're not speaks to the severity of the jobs crisis and the ongoing lack of confidence in the future direction of home prices.

S&P/Case-Shiller: Good news/bad news in June

2010-08-31T09:03:00.002-04:00

The S&P/Case-Shiller home price index figures were just released. The good news? Home prices in 20 major metropolitan areas rose 4.2% year-over-year in June, compared with forecasts for a gain of 3.5%. On a monthly basis, the index was up 0.28% from May as well.

The moderately bad news? That 0.28% gain was the smallest since the monthly numbers went positive in April. The really bad news? These figures clearly reflect the lagged impact of the burst in spring sales brought about by the tax credit. Since the credit expired and the economy started rolling over again, home sales have taken an Acapulco-style cliff dive. Anyone who thinks that won't impact the pricing figures down the road needs to spend some time reading his Economics 101 textbook.

Housing starts up, permits down in July

2010-08-17T08:33:00.005-04:00

The latest figures on home construction just hit the tape. So what happened in July?

* Overall housing starts climbed 1.7% from June to a seasonally adjusted annual rate of 546,000. That missed expectations for a reading of 560,000. June's figure was revised down to 537,000 from 549,000. Building permits slumped 3.1% to 565,000 from a downwardly revised 583,000, worse than the 0.5% decline that economists were expecting. That leaves permits at the lowest level since May 2009.

* By property type, single family starts dropped 4.2%, the third monthly decline in a row. They're now running at a 14-month low. The volatile mutlifamily category jumped 32.6% after plunging 33.3% a month earlier. Single family permits dropped 1.2% -- the fourth decline in a row -- while multifamily permits slumped 8%.

* Starts were strong in the Northeast (+30.5%) and Midwest (+10.7%). But they were flat in the West and down 6.3% in the South. Permits dropped in most of the country, falling 25.9% in the Northeast, 4.9% in the West, and 1.1% in the Midwest. But they rose 3.9% in the South.

When you can't sell homes, you aren't going to build them. So it should be no surprise that builders are still sitting on their hands. In July, single-family starts fell to their lowest level in more than a year, while permitting activity slumped to the lowest since May 2009. Regional performance was mixed when it came to starts, but relatively poor on the permitting front.

Normally an upswing in construction helps the economy emerge from recession. But not this time. Construction activity remains anemic, and the industry continues to hemorrhage jobs. The ironic thing is that new home inventory is extremely lean. The oversupply problem there has been "fixed." But since there's so much competition from nearly-new distressed inventory and foreclosures, builders aren't willing or able to ramp up activity. Hence, no housing recovery.

NAHB index slumps in August to 17-month low

2010-08-16T10:01:00.002-04:00

The National Association of Home Builders just released its latest numbers on the housing market. The overall index slumped to 13 from 14, compared with expectations for a slight increase. That's the worst level going all the way back to March 2009.

The subindex that measures current sales slipped to 14 from 15, while the index that measures expectations about the future tanked to 18 from 21. The subindex tracking buyer traffic was unchanged at 10. Regionally speaking, the index declined to 18 from 24 in the Northeast, to 13 from 14 in the South, and to 8 from 9 in the West. The Midwest index held steady at 15.

The double dip in housing continued into August, according to the latest figures from the NAHB. The group's overall housing index fell to its lowest level since March 2009, with builders gloomy about both current sales and market conditions down the road.

What's going on? Well, we have incredibly cheap mortgage rates and cheap home prices. But buyers just aren't stepping up to the plate. This fits with the "no jobs = no home sales" thesis I laid out a few months ago. Unless and until the job market improves, we are simply not going to get any traction in the housing market. And so far, job growth is missing in action.

Pending home sales slump again

2010-08-03T10:02:00.002-04:00

Pending home sales were just reported for June. They slumped another 2.6% in the month after a 29.9% plunge in May. That failed to meet market expectations for a 4% gain. Moreover, sales were weak in three out of four regions of the country -- down 0.2% in the West, down 9.5% in the Midwest, and down 12.2% in the Northeast. They ticked up 3.7% in the South. The index, at 75.7, is off 18.6% from its year-ago level and the lowest in history.

If you're looking for a pulse in the U.S. housing market, best of luck. I can't seem to find one. Pending home sales fell once again, with broad-based geographic declines and a nominal new low for the index, first published in 2001. Leading indicators like the Mortgage Bankers Association's index of purchase loan applications also can't get off the mat.

What's remarkable about the weakness is that it's coming at a time where mortgage rates are hovering around 4.5%. These aren't just the lowest mortgage rates in the past several years. Some research suggests they're the lowest since before the Wright Brothers first flew at Kitty Hawk! Unless and until we get a rebound in the labor market, we're just not going to see good things happening in housing.

New home sales bounce in June

2010-07-26T10:09:00.002-04:00

We just got data on new home sales for June. Here's what the figures looked like:

* New home sales rose 23.6% to a seasonally adjusted annual rate of 330,000. That topped the average estimate of 310,000 units. Sounds like a big rise ... until you see that the previous month's sales were revised sharply lower to 267,000. A net 62,000 homes were actually lopped off the sales tally for the past three months, and the June number was still the second-worst reading on record.

* Regionally, sales were up in three out of four locations. The Northeast showed the biggest gain at 46.4%, followed by the South at 33.1%. Sales rose 20.5% in the Midwest, but dropped 6.6% in the West.

* The number of homes for sale dipped to 210,000 from 213,000 in May. That's the lowest level in any month going all the way back to September 1968. The months supply at current sales pace indicator of inventory slipped to 7.6 from 9.6. The median price of a new home slipped 1.4% to $213,400 from $216,400 in May.

New home sales picked up a bit in June. But it was still the second-worst month in U.S. history. Moreover, revisions to previous reports show home sales have been running at even more depressed levels than we thought. That makes it hard to get too excited about these figures.

If there's a bright spot, it's that new home inventories remain extraordinarily lean. We have fewer houses looking for buyers than we've had at any point in the last 42 years. But even that ostensibly good news comes with an asterisk. Because we have so much competition from the distressed, "used" home market, home builders aren't able to ramp up pricing in response. All in, I expect the housing market to remain challenging for some time, especially given the ongoing weakness we're seeing in the labor market.

Existing home sales drop 5.1% in June

2010-07-22T09:41:00.006-04:00

We just received existing home sales data for June. Here's what the numbers looked like:

* Existing home sales fell 5.1% to a seasonally adjusted annual rate of 5.37 million in June from 5.66 million in May. That was moderately better than forecasts for a sales rate of 5.1 million.

* Regionally, sales fell in the majority of the country. They dropped 6.5% in the South, fell 7.5% in the Midwest, and tanked 9.3% in the West. Sales rose 7.9% in the Northeast. By property type, single family sales dropped 5.6% while condo and coop sales slipped 1.5%.

* The raw number of homes for sale rose 2.5% to 3.992 million from 3.893 million in May. That was also up 4.7% from year-ago levels. The months supply at current sales pace indicator of inventory shot up to 8.9 from 8.3, led by deterioration in the single family market. Median prices rose 5.2% to $183,700 from $174,600 a month earlier. They're up 1% from the year-ago level.

The housing market continues to struggle in the wake of the tax credit expiration. Sales fell in most of the country in June, while the inventory of homes on the market rose. Home prices were roughly unchanged from year-ago levels, but pricing tends to lag other indicators when conditions head south. Another bout of home price deterioration appears likely, though it'll be much more gradual than what we've seen to date.

I've said it before and I'll say it again: The labor market is absolutely key to the health of housing. Bargains abound in the residential real estate market. But many buyers lack the confidence or the income to take advantage of them. Fed Chairman Ben Bernanke recently forecast a lengthy period of high unemployment. I can't argue with that outlook, and that's why I'm not looking for a robust housing recovery.

Housing starts slump, permits perk up

2010-07-20T08:32:00.003-04:00

Housing starts figures for June were just released. Here's what they looked like ...

Housing starts dropped 5% to a seasonally adjusted annual rate of 549,000 from 578,000 in May. That's also down 5.8% from 583,000 in the year-ago month, and it leaves starts at their lowest level since October. Single family starts slipped 0.7% from May and 4.6% from the year-ago level, leaving them at a 13-month low. On a regional basis, starts fell across the board -- with declines of 2.4% in the South, 5.9% in the West, 6.9% in the Midwest, and 11.3% in the Northeast.

Meanwhile, building permits popped 2.1% to a seasonally adjusted annual rate of 586,000 in June from a revised 574,000 in May. That's down 2.3% from the 600,000 permits issued a year ago. Single family permits fell 3.4% to 421,000 from 436,000. Regionally, we saw a 32.3% monthly gain in the Northeast and a 9.7% rise in the West. But permit issuance fell 7.8% in the South and 10.8% in the Midwest.

The housing industry remains stuck in a rut, with both sales and construction activity moribund. Single family permits and starts slumped in June, and relatively broad-based regional weakness was evident up in the overall figures. Builders simply lack the confidence -- or in some cases, the financing -- to ramp up construction, especially in the wake of the home buyer tax credit's expiration.

What about the longer term outlook? Well, cheap mortgage rates and cheap homes should help ease the housing market's pain. But until we see signs of life in the labor market, we're just not going to see a robust recovery -- only more malaise.

NAHB index slumps again in July, hits 15-month low

2010-07-19T10:02:00.004-04:00

The National Association of Home Builders just released its latest read on the housing market. The group's housing market index slumped to 14 in July from 16 in June. That's the lowest reading since April 2009 and worse than the average economist forecast of 16.

The subindex measuring present sales dropped to 15 from 17, while the subindex tracking expectations about future sales dipped to 21 from 22. The subindex measuring prospective buyer traffic fell to 10 from 13.

Regionally, it was a mixed bag. The Northeast index jumped to 23 from 16 and the Midwest index ticked up to 15 from 14. But the South index slumped to 14 from 19 while the West index collapsed to 9 from 14.

Houses are cheap. Mortgage rates are extremely low. Yet home shoppers are MIA. That's what the latest NAHB figures are telling us. Builders surveyed by the trade group were generally gloomy about current and future sales, and they aren't seeing much traffic through their developments.

My take? The expiration of the tax credit is clearly hurting the industry. But the deterioration in the broader economy and the dismal labor market are much more powerful -- and negative -- forces. With growth slumping again, and unemployment hovering near the double digits, we simply don't have the necessary ingredients for a sustainable recovery in housing. So we're not getting one.

June employment report weak

2010-07-02T08:31:00.004-04:00

We just got the latest payroll figures for June. They look weak, though not ridiculously so. Some of the details? Employment dropped 125,000 overall, roughly in line with the forecast of -130,000. That includes a huge drop in temporary Census workers. If you strip that out, you get an 83,000 increase in private sector jobs, somewhat below the 110,000 that economists were looking for. A separate household survey showed a loss of 350,000 jobs.

Meanwhile, the unemployment rate actually fell to 9.5% from 9.7%. But that's because the labor market overall shrank by 652,000 workers, meaning the decline in unemployment isn't really "good" news. Average hourly earnings dropped 0.1% compared with a 0.2% gain a month earlier and the +0.1% forecast. That's the worst performance I can see, but my data only goes back to 2006. The diffusion index, which tracks how many industries are adding workers vs. how many are cutting, weakened to 52.2 from 54.8 in the private sector. That's another disappointment.

May pending home sales plunge to record low.

2010-07-01T10:01:00.004-04:00

May pending home sales were a disaster. Pending sales of used homes plunged 30% from April, compared with the 14.2% decline economists were expecting. Sales tanked across the board, with a 20.9% decline in the West, a 31.6% drop in the Northeast, a 32.1% decline in the Midwest, and a 33.3% fall in the South. The pending sales index has now fallen to 77.6, the lowest level since the National Association of Realtors began tracking the data in 2001.

If you're looking for a silver lining in housing, you aren't going to find it here. Demand has fallen off a cliff in the wake of the tax credit expiration, with pending sales falling by the biggest margin ever to the lowest level ever. The latest report comes in the wake of data showing large declines in new home sales and builder confidence.

What's the problem? Aren't homes cheap? Aren't mortgage rates at record lows? The answers are "yes" and "yes." But the overall economy is rolling over, consumer confidence is slumping and, most importantly, we just aren't creating jobs. It sounds simplistic, but it bears repeating: "No job = No house." And with so many Americans unemployed or underemployed, the housing market is going to keep hurting.

New home sales implode in May, hit record low

2010-06-23T09:38:00.008-04:00

We just got figures on the new home market in May. Here's a recap:

* New home sales collapsed a whopping 32.7% in May after jumping 14.7% in April. That left the seasonally adjusted annual rate at 300,000, compared with a revised 446,000 in April and a consensus forecast of 410,000. That is the lowest level in the history of the data, which goes back to 1963. Regionally, sales dropped 23.9% in the Midwest, 25.4% in the South, 33.3% in the Northeast, and a whopping 53.2% in the West.

* The raw number of homes for sales slipped slightly to 213,000 from 214,000 in April. That's the lowest level going all the way back to November 1970. Compared with a year earlier, inventory was down 26.8%. The months supply at current sales pace indicator of inventory surged to 8.5 from 5.8. That's the highest since June 2009.

* Median prices fell 1% to $200,900 from $202,900 in April. On a year-over-year basis, prices tanked 9.6%, the biggest such drop since July 2009.

The May new home sales figures were so awful, I'm at a loss for words. Sales imploded by almost a third, with a whopping 53% plunge out West. While raw inventory held steady at the lowest level in almost four decades, prices dropped by almost 10% from a year ago as demand cratered. That's the biggest drop in almost a year.

We all knew there would be a housing hangover from the expiration of the tax credit. But this decline takes your breath away. Something else is at work, and it's the labor market. We simply aren't creating private sector jobs in this country, and until we start doing so, we're not going to see healthy housing demand. No wonder builders are getting much more pessimistic, construction activity is dropping, and lumber prices are taking an Acapulco cliff dive!

Existing home sales drop in May

2010-06-22T09:36:00.008-04:00

Existing home sales figures for May were just released. A recap can be found below ...

* Existing home sales fell 2.2% to a seasonally adjusted annual rate of 5.66 million in May from 5.79 million in April. That was far worse than forecasts for a sales rate of 6.12 million, and comes on the heels of a 8% gain a month earlier.

* Regionally, sales were a mixed bag. They tanked 18.3% in the Northeast and held steady in the Midwest. Sales inched up 0.5% in the South and gained 4.9% in the West. By property type, single family sales fell 1.6% while condo and coop sales dropped 6.8%, the sharpest monthly decline since January.

* The raw number of homes for sale fell 3.4% to 3.89 million from 4.029 million in April. Compared with a year earlier, supply was up 1.1%. The months supply at current sales pace indicator of inventory dipped ever so slightly to 8.3 from 8.4. Median prices rose 4.2% to $179,600 from $172,300 a month earlier. They're also up 2.7% from the year-ago level of $174,800.

The second burst of activity in the housing market, courtesy of the tax credit extension, appears to be running out of steam. Existing home sales came in well below expectations in May. New home orders are trailing off. Lumber prices have plunged more than 40% in a virtual straight line. And purchase mortgage applications and builder confidence are both hitting the skids.

We still have cheap homes and cheap mortgages there for the taking. We just don't have a lot of buyers willing or able to step up to the plate. That will likely remain the case unless and until we get some momentum in the job market. So far, that's MIA.

NAHB index tanks in June

2010-06-15T10:01:00.003-04:00

The National Association of Home Builders reported its latest figures on home builder optimism -- and they were plum ugly. The headline index tanked to 17 in June from 22 in May. That was far worse than the 21 reading that economists were looking for.

All three sub-indices fell: The index tracking present sales dropped to 17 from 23 ... the index tracking expectations about future sales fell to 23 from 27 ... and the index tracking prospective buyer traffic slumped to 14 from 16. Regionally speaking, the gentlest declines were in the Midwest (down to 14 from 17) and the South (to 19 from 22). The West index dropped to 15 from 19 while the Northeast index was nearly cut in half, falling to 18 from 35.

The latest housing market figures remind me of what happens when an athlete stops taking steroids. Those tackling and batting records pass into the history books -- and all you're left with is a washed up guy whose best days are behind him. In the case of housing, the home buyer tax credit clearly juiced sales through the spring. But the drugs have now been taken away, and we're seeing sales slump as a result. In fact, we haven't seen a monthly decline this severe since November 2008 -- in the depths of the credit crisis and recession.

Housing remains very affordable, thanks to the double-barreled benefit of cheap financing and cheap pricing. But we're lacking a catalyst for a robust recovery, especially when you consider the lackluster state of the U.S. labor market. So don't look for the housing or construction industries to hit the ball out of the park any time soon.

New home sales surge 14.8% in April

2010-05-26T09:39:00.009-04:00

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!

Existing home sales jump 7.6% in April

2010-05-24T09:41:00.008-04:00

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.

May NAHB index pops to 33-month high

2010-05-17T13:00:00.004-04:00

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.

Pending home sales pop in March

2010-05-04T09:59:00.004-04:00

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.

New home sales explode 27% in March

2010-04-23T09:49:00.005-04:00

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.

Existing home sales pop in March

2010-04-22T09:50:00.004-04:00

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.

Housing starts climb to 16-month high in March

2010-04-16T08:31:00.004-04:00

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.

NAHB Index Surged in April

2010-04-15T13:44:00.002-04:00

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.

Pending home sales surge in February

2010-04-05T09:45:00.005-04:00

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.

New home sales fall to record low in February

2010-03-24T09:53:00.008-04:00

How did the new home market perform in February? Glad you asked. Here are details from the Census Bureau ...

* New home sales dipped 2.2% to a seasonally adjusted annual rate of 308,000 in February from an upwardly revised 315,000 in January. That was slightly below forecasts for a sales rate of 315,000 and the lowest level in 47 years of record-keeping.

* Regionally, sales dropped 20% in the Northeast and 18% in the Midwest. They fell 4.6% in the South, but jumped 20.8% in the West.

* The raw number of homes for sale inched up to 236,000 from 233,000 in January. Compared with a year earlier, supply was down 28%. The months supply at current sales pace indicator of inventory climbed to 9.2 from 8.9. Median prices rose 6.1% to $220,500 from $207,900 a month earlier. On a year-over-year basis, prices were up 5.2%, the biggest yearly gain since September 2007.

What's the story on housing? The market remains stuck in the doldrums, that's what. New home sales slumped to the lowest level since at least 1963, while a key measure of market supply worsened. If there's a silver lining, it's that median prices increased at the fastest year-over-year rate since late 2007. We'll likely see some pick up in the March and April figures as well, with buyers looking to get in before the tax credit expires. The credit-fueled pop won't be anything like what we saw the first time around however.

Stepping back for a minute to look at the big picture, I can't help but point out (again) how affordable housing is. Cheap rates and cheap home prices have restored the affordability that was sorely lacking a few years ago. Core buyers and investors are out there, and they're buying product that's priced right. This is why I don't expect a huge new collapse in the housing market, just more churning near these depressed levels.

Existing home sales dip in February

2010-03-23T09:48:00.010-04:00

We just got our latest update on the performance of the existing home market. According to the National Association of Realtors ...

* Existing home sales slipped 0.6% to a seasonally adjusted annual rate of 5.02 million in February from 5.05 million in January. That was roughly in line with forecasts for a sales rate of 5 million.

* Regionally, sales were mixed. They fell 4.7% in the West and dipped 1.1% in the South. Sales rose 2.8% in the Midwest and climbed 2.4% in the Northeast. By property type, single family sales fell 1.4%, while condo and coop sales rose 4.8%.

* The raw number of homes for sale rose 9.5% to 3.589 million from 3.277 million in January. Compared with a year earlier, supply has dropped 5.5%. The months supply at current sales pace indicator of inventory rose to 8.6 from 7.8; that's the highest since August. Median prices were virtually unchanged at $165,100 in February versus $164,900 in January. On a year-over-year basis, prices were down 1.8%.

It seems we've found a "home base" level in housing. Cheap mortgage rates are somewhat offsetting the pressure of tighter lending standards. Foreclosures continue to be parceled out into the market. But aggressive loan modifications efforts are keeping them from flooding the market all at once -- and bargain hunters are buying when those units are priced right. Existing home inventory remains high. But the collapse in new home construction has left that part of the market with the smallest crop of for-sale inventory since President Nixon was in office.

This uneasy standoff -- with positive and negative forces roughly offsetting each other -- should persist for the remainder of the year. Depending on the economy's performance, 2011 could be yet another snoozer. That's better than the freefall from 2005-2009, but nothing like the vigorous recoveries we've seen after previous housing market downturns.

Housing starts, permits flat lining

2010-03-16T08:24:00.007-04:00

Housing starts and permits data for February just hit the tape. Here's a recap of the numbers:

* Housing starts fell 5.9% to a seasonally adjusted annual rate of 575,000 in February, which sounds worse than the -3.6% forecast. But the January starts figure was revised up to 611,000 from 591,000 and the raw number that economists were looking for was 570,000. Long story short, starts were mostly in line with expectations. Building permit activity fell 1.6% to 612,000, which was slightly better than the 601,000 forecast.

* By property type, single family starts dipped 0.6%, while multifamily starts tanked 30.3%. Permitting activity slipped 0.2% in the single-family market and fell 7.6% in the multifamily category. If you step back and look at the longer-term trend, it's fair to say we've basically flat-lined for the past year.

* Regionally, starts were a mixed bag. They dropped 15.5% in the South and fell 9.6% in the Northeast, but rose 7.9% in the West and gained 10.6% in the Midwest. Building permits slipped 2.1% in the West and fell 5.8% in the South. They flat lined in the Northeast and rose 11.7% in the Midwest.

Someone should get out the paddles -- because the housing market is flat lining! Tight credit conditions, anemic demand, and inventory pressure from the "used" home market are all keeping builders on the gurney. And frankly, that's what I've been expecting.

While the inventory of new homes on the market has plunged to the lowest level since the early 1970s, distressed inventory continues to be parceled out into the market. That means buyers have plenty of cheap existing homes to choose from. That, in turn, means builders have little incentive to ramp up production. We won't see a more notable upturn in starts -- or if you prefer, the patient walking on his own -- until 2011. But at least the three-year crash that began in 2006 is over.

NAHB index falls in March

2010-03-15T12:59:00.007-04:00

The National Association of Home Builders just released its latest report on the housing industry. The overall index fell to 15 in March from 17 in February. Among the subindices, the index tracking present sales declined to 15 from 17, while the index measuring perceptions about future sales dropped to 24 from 27. Those figures are roughly in the same range as they've been for months. However, an index measuring present buyer traffic slumped to 10 from 12 -- the lowest reading in a year.

Regionally speaking, the Northeast fared the best. Its index rose to 23 from 18. The West index also inched up to 15 from 14. Meanwhile, the South index fell to 18 from 19 and the Midwest index slid to 10 to 13.

Home buying activity remains muted, especially on the new housing side of the ledger. Builders of new homes are simply having a very difficult time competing against "nearly new" homes being dumped on the market by burned speculators and banks. That dynamic will persist for some time because foreclosed homes will continue to be parceled out into the market over the next couple of years. Still, we're slowly but surely working through the overhang of excess inventory. That will eventually help stabilize home pricing and make life easier on the builders.

Pending home sales tank almost 8% in January

2010-03-04T09:53:00.005-05:00

The pending home sales figures for January just hit the tape. Here's a recap:

* Sales dropped 7.6% between December and January. That compared to the 1% gain that economists were expecting.

* At 90.4, the index was up up 12.4% from the year-ago level of 80.4.

* By region, pendings fell across the board. They slipped 2.1% in the South, fell 8.7% in the Northeast, dropped 8.9% in the Midwest, and tanked 13.2% in the West.

Pending sales were another big disappointment in January. Transactions fell much more sharply than expected, with declines noted in all regions of the country. I'm not sure why this was such a surprise, given the lousy new home sales figures we already had. But it is what it is.

The bigger picture story here? The hangover from the initial home buyer tax credit is proving to be worse than expected. Throw in a lackluster job market and a sputtering economy, and you can see why sales aren't spiking. It doesn't mean we're headed into an even-deeper housing depression. Lower prices and low mortgage rates are combining to make homes more affordable than they've been in a long time -- and some buyers are responding. But it does mean a vigorous recovery will continue to be MIA.

Existing home sales tank in January

2010-02-26T09:54:00.007-05:00

The new home sales report for January was downright dismal. So how did the existing market fare?

* Existing home sales dropped 7.2% to a seasonally adjusted annual rate of 5.05 million in January. That was well below forecasts for a reading of 5.5 million.

* Regionally, sales were down across the board. They fell 5.2% in the West, 6.9% in the Midwest, 7.4% in the South, and 10.9% in the Northeast. By property type, single family sales dropped 6.9%, while condo and coop sales fell 8.1%.

* The raw number of homes for sale slipped 0.5% to 3.265 million from 3.283 million in December. Compared with a year earlier, supply has fallen 9.6%. The months supply at current sales pace indicator of inventory rose to 7.8 from 7.2; that's the highest since September. Median prices fell 3.4% to $164,700 in January from $170,500 in December. On a year-over-year basis, prices were unchanged.

New Year's revelers weren't the only ones with hangovers in January. Both the existing and new home sales markets clearly suffered from one related to the home buyer tax credit. The credit juiced sales in mid-2009 for new homes and late-2009 for existing homes. Yet in its wake, demand is clearly tapering off. The extension and expansion of the credit should help later in the spring selling season as the new deadline looms. But so far, it just isn't happening, with sales plunging almost 23% in the past two months.

Is there any good news in the latest batch of figures? Well, the supply of homes for sale continues to shrink. We've chipped away at the mountain of inventory to the tune of 1.3 million units over the past year and a half. That's a sign of progress. With median prices now running at their lowest level since May 2002, we're also taking care of the housing affordability problem that helped burst the bubble in the first place. That's cold comfort for upside-down homeowners. But it's exactly what we need to prompt some bottom-fishing by today's budget-conscious buyers.

New home sales plunge to record low

2010-02-24T10:36:00.002-05:00

The latest new home sales figures came out a little while ago. No sugar-coating these numbers. they stink. More details:

* New home sales plunged 11.2% in January to a seasonally adjusted annual rate of 309,000 from an upwardly revised 348,000 in December. That was much worse than the 354,000 figure economists were expecting and below the previous record low sales rate of 329,000 a year ago. Data on new homes goes all the way back to 1963.

* The regional breakdown wasn't anything to write home about, either. Sales fell 9.5% in the South, dropped 11.9% in the West, and plunged 35.1% in the Northeast. They inched up 2.1% in the Midwest.

* The supply of new homes for sale increased to 234,000 from 233,000 in December. That's the first time in 32 months that the raw number of homes for sale increased. The sharp decline in sales drove the "months' supply at current sales pace" indicator of inventory to 9.1 from 8. That's the highest reading since last May (9.5).

* The median price of a new home fell 5.6% to $203,500 from $215,600 in December. On a year-over-year basis, prices fell 2.4%. Home prices are now the lowest since December 2003.

So much for the trend of decent housing news! January's new home sales figures were awful across the board. Fewer new homes were sold in this country than at any time since the Kennedy administration. The inventory of homes for sale increased, and the median price of a new home fell to its lowest level in more than six years.

What the heck happened? For one thing, the new home builders are getting their clock cleaned by the existing home market. Distressed inventory continues to hit the market at cut-rate prices, drawing potential buyers away from new product. For another, we're still dealing with a tax credit "hangover" effect. And let's face it, the job market is nothing to write home about, either. I still think we're on the long, slow road to an anemic, lackluster recovery in housing. But numbers like these can sure shake your faith.

December S&P/Case-Shiller: Prices down 3.1% YOY

2010-02-23T09:01:00.002-05:00

The latest S&P/Case-Shiller data on home prices was released this morning. The 20-city index rose 0.3% between November and December, the biggest monthly rise since August. On a year-over-year basis, prices are still down 3.1%. But that's the smallest decline going all the way back to May 2007. Prices are actually UP from year-ago levels in six cities now, led by San Francisco at 4.8% and Dallas at 3%. We are still seeing YOY declines in hard hit markets like Las Vegas (-20.6%), Tampa (-11%) and Detroit (-10.3%).

More evidence that housing is broadly stabilizing? Yep.

MBA: Q4 delinquencies down, foreclosures up

2010-02-19T10:01:00.003-05:00

The Mortgage Bankers Association just released figures on Q4 2009 home loan performance. What did the numbers show?

* The overall mortgage delinquency rate fell to 9.47% in Q4 2009 from 9.64% in Q3 2009. That's the first quarter-over-quarter decline in delinquencies since Q1 2007. Of particular note: The percentage of loans 30 days behind on payments dropped to 3.31% -- the lowest since Q2 2008. That is an encouraging sign because it signals that fewer borrowers are entering the delinquency/foreclosure process, the first step toward recovery. But let's be clear that the overall delinquency rate is still much, much higher than the recent low of 4.31% in Q1 2005.

* Breaking it down by loan type, the subprime DQ rate fell to 25.3% from 26.4% while the prime-only DQ rate dropped to 6.73% from 6.84%. The FHA delinquency rate slipped to 13.6% from 14.4%, while the VA DQ rate fell to 7.4% from 8.1%.

* What about foreclosures? The percentage of loans in any stage of foreclosure rose to 4.58% from 4.47%. Both prime and subprime foreclosure rates rose to new highs. However, the rate of foreclosure STARTS fell to 1.2% from 1.42%. That's the lowest percentage of loans entering the foreclosure process since Q4 2008.

I pointed out as far back as May 2009 that it appeared the housing market was stabilizing. My call: That cheaper home prices, low mortgage rates, increased affordability, and the overall improvement in the economy would cause sales rates and construction activity to stabilize. I added that inventory levels had peaked, but that prices would likely still be under pressure through the end of 2010.

Why share that background information? Because we're now seeing the next piece of the puzzle fall into place. Specifically, early stage delinquencies are stabilizing. This is a key sign that housing market conditions are slowly, grudgingly, getting slightly better. We're also seeing foreclosure starts fall as loan modification efforts ramp up and regulatory forbearance shifts into high gear.

This does NOT mean we'll have a vigorous recovery. We won't. Many loan mods will fail, the unemployment rate remains elevated, and lending standards will remain relatively strict for some time. But almost five years after the crash began, it's encouraging to see yet another indicator pointing toward broad-based stabilization.

Housing starts pop, permits fall in January

2010-02-17T08:32:00.004-05:00

Housing starts and permits data for January just hit the tape. Here's a recap of the numbers:

* Overall housing starts rose 2.8% to a seasonally adjusted annual rate of 591,000 in January from 575,000 in December. The level of starts was slightly above expectations for a reading of 580,000. However, building permit activity fell 4.9% to 621,000 from 653,000.

* By property type, single family starts gained 1.5%, while multifamily starts popped 9.2%. Permitting activity inched up 0.4% in the single-family market, but fell 23% in the multifamily category.

* Regionally, starts rose 1% in the South, gained 8.9% in the West, and jumped 10% in the Northeast. Starts dipped 3.2% in the Midwest. As for building permits, they dipped 1.3% in the South, declined 17.8% in the Northeast, and plunged 20.2% in the Midwest. Permits rose 8.5% in the West.

I hope I don't sound like a broken record here. But the housing market continues to show signs of stabilization. Indeed, builder optimism, sales, and starts are all flattening out after a plunge that reminds me of the ski slopes at the Vancouver Olympics. With new home supply running at the lowest levels since the early 1970s, builders are running lean and mean -- making it likely that we've seen the worst of the construction downturn.

At the same time, a vigorous upturn is unlikely. The supply of "used" homes on the market is still elevated, and distressed property will continue to be parcelled out by agents, banks, and other lenders over time. Until that supply is exhausted, construction activity will remain muted.

NAHB index rises to 17 in February

2010-02-16T13:01:00.003-05:00

The National Association of Home Builders just released its latest figures on builder sentiment. The group's headline index climbed to 17 in February from 15 in January. That was slightly better than expectations.

The subindex measuring present single family sales rose to 17 from 15, while the subindex that tracks expectations about future sales inched up to 27 from 26. The subindex that tracks prospective buyer traffic was unchanged at 12. Regionally, the Northeast index fell to 19 from 20, while the West index dropped to 14 from 15. The Midwest index rose to 13 from 11, while the South index climbed to 19 from 17.

Builders were somewhat more optimistic about present and future sales in February. But buyers aren't exactly beating down their doors. Indeed, traffic through models and sales offices is nowhere near what builders would like to see.

Why aren't industry players more ebullient? Because they're competing against deeply discounted distressed inventory. Tighter lending standards and the anemic job market are two other headwinds. Still, nothing in the latest figures suggests a new major leg down is coming. Rather, the slow anemic recovery I've been predicting for several months continues apace.

Another ugly Treasury auction!

2010-02-11T13:23:00.001-05:00

Investors are increasingly reluctant to step up and buy long-term Treasuries. The proof is in the results from yesterday’s sale of $25 billion in 10-year notes and today’s sale of $16 billion in 30-year bonds.

Today, the bonds were sold at a yield of 4.72%, versus pre-auction talk of 4.687%. The bid-to-cover ratio was just 2.36, compared with an average over the last 10 auctions of 2.48. Indirect bidders took down just 28.5% of the auction, compared to a 10-auction average of 43.2%. These results are simply awful.

Yesterday, the 10-year note auction also went over like a lead anchor. Only 33.2% of the notes went to indirect bidders. The average over the last 10 auctions was 39.3%. The bid-to-cover ratio was just 2.67, down from 3 at last auction and a 10-auction average of 2.76. Also, the yield at the sale was 3.692% vs. a 3.68% pre-auction forecast.

This is precisely what I’ve been warning about. The debt and deficit crisis that has already struck countries like Portugal, Greece, and Spain is inevitably going to make its way around to larger countries like the U.K. and the U.S. The simple reason? We face similar problems with massive debts and massive deficits.

In other words, stay the heck away from long-term Treasuries!

Pending home sales inch up in December

2010-02-02T09:31:00.004-05:00

Pending homes sales figures were just released for December. Here's what the numbers showed:

* Sales rose 1% between November and December. That was right in line with what economists were expecting.

* At 96.6, the index was up 10.9% from the year-ago level of 87.1.

* By region, pending sales were broadly higher. They climbed 2.2% in the South, 2.3% in the Northeast, and 5.2% in the Midwest. Sales fell 3.8% in the West.

The pending sales index stabilized at the end of 2009. That potentially sets the stage for a more positive spring selling season. Indeed, with mortgage rates low, house prices down, and the supply of homes for sale steadily falling, it's easy to see why the market should stabilize.

At the same time, we lack a catalyst for a vigorous recovery. Unemployment remains a problem and the housing market is still dealing with the "hangover effect" from the bubble -- too much foreclosure inventory, tighter lending standards, and so on. The result? We'll likely just muddle through instead of witness a V-shaped recovery like those that followed previous housing busts.

New home sales slip, hit 9-month low

2010-01-27T09:43:00.005-05:00

We just got the latest new home sales figures for the month of December. Here's what they showed:

* New home sales dropped 7.6% to a seasonally adjusted annual rate of 342,000 from an upwardly revised 370,000 in November. That missed expectations for a sales rate of 366,000, and it leaves sales at the lowest level since March. The regional figures were all over the map, with sales up 42.9% in the Northeast, down 41.1% in the Midwest, up 5.2% in the West, and down 7.3% in the South.

* The supply of new homes for sale dropped again to 231,000 from 235,000. That's the 32nd consecutive monthly decline and it leaves the raw number of homes for sale at the lowest level since April 1971. But due to the decline in the sales rate, the "months supply at current sales pace" indicator of inventory rose to 8.1 from 7.6. That's the highest since June.

* The median price of a new home rose 5.2% to $221,300 from $210,300 in November. That was still a decline of 3.6% from the year earlier level, however.

The new home market continued to wilt late in 2009. Sales slipped to the lowest level in nine months, while pricing remained weak. Ongoing labor market malaise and the tax credit "hangover" effect are two headwinds. Another is aggressive competition from banks and other lenders buried in foreclosures. The buyers who are willing and able to buy are flocking to cheaper, distressed, "used" homes because -- to paraphrase Willie Sutton -- "That's where the bargains are."

I still believe the "three steps forward, two steps back" recovery is in place. But as I've said all along, it will NOT be a vigorous, V-shaped affair like we've seen in past housing recoveries. We experienced a once-in-a-lifetime housing bubble, not a traditional expansion. That means we shouldn't expect a traditional, vigorous, cyclical recovery.

Curve, inflation plays flying

2010-01-08T13:40:00.003-05:00

Earlier this morning, I published a piece predicting that the Fed under "Helicopter" Ben Bernanke won't tighten rates until the cows come home.Today's jobs report only underscores my certainty in this matter.

The currency and bond markets are getting the message loud and clear, with breakouts, breakdowns, and crazy activity visible all over the place. A sampling:

* Forget the yen and the euro. Look at the Korean won, the Indonesian rupiah, the Indian rupee, or the Philippine peso. They're all breaking out against the buck. You can see the same thing happening in South America, with the Brazilian real and Chilean peso about to blow the doors off the dollar.

* Back-month Eurodollar contracts are flying. December 2010 EDs up 9 ticks to 98.78 at last check, for instance. That means Fed tightening is being priced OUT of the market.

* The yield on the 2-year Treasury Note was recently down 7 basis points to 0.95. Meanwhile, the yield on the 30-year Treasury Bond was recently UP about a bp to 4.69%. Result: The 2s-to-30s spread just hit 373.8 basis points, the highest in the history of my data, which goes back to 1980.

* And inflation concerns? Well, the 10-year TIPS spread has jumped to 246.5 bps. That's the highest going all the way back to July 2008.

What's the umistakably clear message from the capital markets: 'Fed -- wake up! Start hiking rates." But as I noted, they won't ... until it's too late.

Job market weak in December, easy money to keep on coming

2010-01-08T08:35:00.003-05:00

The December jobs report was disappointing, with the economy shedding 85,000 jobs against expectations for an unchanged reading. November's reading was revised to +4,000 from -11,000. But the unemployment rate held at 10%, which has to be disappointing, and the separate household survey showed a nasty loss of 589,000 jobs.

Some slight positives: Average hourly earnings were up 0.2% and average weekly hours held at 33.2. Temporary help agencies added 47,000 jobs, the fifth positive reading in a row and a potential precursor to gains in full-time jobs. The private nonfarm diffusion index, which measures how many industries are shedding workers vs. how many are adding them, ticked up ever so slightly to 38.7 from 38.5.

This report virtually guarantees the Fed will keep flooding the markets with easy money. That seems to be the knee jerk reaction in the marketplace, too. The Dollar Index has given up early gains ... gold has swung from early losses to small gains ... and deferred-month eurodollar contracts are surging. That's the market pricing OUT Fed tightening.

Pending home sales plunge 16% in November

2010-01-05T09:39:00.005-05:00

The National Association of Realtors came out with its pending home sales data for November a little while ago. Here's what the numbers looked like:

* Pending sales plunged 16%. That compared with an expected decline of 2%. Yikes!

* On a year-over-year basis, the pending sales index actually rose 15.5% to 96 from 83.1.

* Regionally, sales fell across the country. Sales dropped 2.7% in the West, 15% in the South, and 25.7% in both the Northeast and Midwest.

Pending home sales plunged by a much larger than expected margin in November. That's the bad news. The good news? It's largely tax credit related. Since the period covered in this report, the first-time buyer credit has been expanded and extended. We've also seen indicators of unemployment and economic growth stabilize over the past few months. So after we work through this period of housing indigestion, we'll likely see sales rates gradually pick up again and home inventories gradually decline.

New home sales tank 11.3% in November

2009-12-23T10:09:00.005-05:00

The new home sales figures for November were released this morning. They weren't pretty -- but I'll explain why I'm not all that concerned in a moment. First, the data ...

* Sales tanked 11.3% to a seasonally adjusted annual rate of 355,000 in November from 390,000 in October. That was well below the average forecast of 438,000 units. Sales fell in three out of four regions -- by 3.3% in the Northeast, 9.2% in the West and 21.1% in the South. They rose 21.4% in the Midwest.

* There were just 235,000 new homes on the market last month. That was down from 240,000 a month prior and the lowest since April 1971. On a months supply at current sales pace basis, inventory rose to 7.9 from 7.2.

* The median price of a new home dropped 1.9% to $217,400 from $221,600 a year earlier.

The new home sales figures didn't bring any similes to Wall Street's face this holiday season. November sales fell much more than expected, hitting the lowest level in seven months. Still, I'm not all that surprised. Some giveback was to be expected given the feared expiration of the tax credit and the pull-forward of some demand. Now that the credit has been extended and expanded, and the economy has improved a bit more, I suspect sales going forward will find support.

Another positive: The supply of new homes for sale continues to fall. We now have fewer new homes on the market than at any time in more than 38 years. There's still plenty of competition from "used" homes, especially distressed property. But even that overhang is gradually coming down. Plus, housing affordability is running at the highest in many years thanks to the price declines we've seen. That should ensure the gradual, anemic recovery in housing will continue into 2010.

Existing home sales surge 7.4% in November

2009-12-22T09:56:00.005-05:00

The latest existing home sales figures hit the tape today. Here's what they showed:

* Existing home sales jumped 7.4% to a seasonally adjusted annual rate of 6.54 million in November. That was up from 6.09 million a month earlier and well above forecasts for a reading of 6.25 million.

* Regionally, sales were strong across the board. They rose 4.8% in the South, 6.6% in the Northeast, 8.4% in the Midwest, and 10.6% in the West. By property type, single family sales surged 8.5%, while condo and coop sales were flat on the month.

* The raw number of homes for sale slipped to 3.518 million from 3.565 million in October. That was down 15.5% from a year earlier. The months supply at current sales pace indicator of inventory dropped to 6.5 from 7. That's the lowest since December 2006. Median prices were roughly unchanged -- $172,600 in November vs. $172,200 in October. That was a decline of 4.3% from a year earlier.

Santa delivered more good news for the housing market today. November home sales easily topped estimates, with strength evident in all regions of the country. Moreover, the inventory of homes for sale continues to dwindle. That shows that distressed properties are being snapped up by investors and single-family buyers, an encouraging sign.

In the big picture, I've been saying for a long time that falling home prices would eventually "fix" the housing crisis. We needed to see prices fall to make ownership competitive with renting again, and to restore the normal relationship of house prices to income. That has now happened, and you're seeing buyers come out of the woodwork as a result. The home buyer tax credit and the Fed's meddling in the mortgage market are also helping the process along.

In short, my call in the spring that the housing market was bottoming out appears right on target. We have since seen sales rise, inventories decline, and construction activity stabilize. Look for pricing to follow later in 2010.

Fed keeps rates stable, reiterates pledge to end some programs, and upgrades its economic outlook

2009-12-16T14:22:00.003-05:00

The Federal Open Market Committee just concluded its policy meeting. As expected, interest rates were left unchanged in a range of 0% to 0.25%. The Fed reiterated that several special support programs for commercial paper, primary dealers, and other constituencies will end on February 1, 2010. The Fed will continue to buy mortgage backed securities and agency debt through at least Q1 2010, however. And it kept its pledge to keep rates "exceptionally low" for an "extended period" of time, despite generally upgrading its view of the economy's performance. The full FOMC statement can be found here.

Housing starts jump 8.9% in November

2009-12-16T08:29:00.006-05:00

Housing starts and permits data for November were released this morning. Here's a recap of the numbers:

* Overall housing starts rose 8.9% to a seasonally adjusted annual rate of 574,000 in November from 527,000 in October. That was exactly in line with the forecast of economists. Permitting activity gained 6% to 584,000 from 551,000. That was a bit better than the 570,000 figure economists were expecting.

* By property type, single family starts gained 2.1% while multifamily starts soared 67.3%. How's that for volatility? Permitting activity was up 5.3% in the single-family market and 8.8% in the multifamily.

* The regional breakdown was positive across the board. Starts rose 1.9% in the West, 3% in the Midwest, 12.3% in the South, and 16.4% in the Northeast. Permits were up in three out of four regions -- by 2.7% in the West, 4.7% in the Northeast, and 10.7% in the South. They slipped 1.9% in the Midwest.

Another month, another sign of a bottom in construction activity. That's my read on the latest stats. We got positive news across the board, with starts and permitting activity increasing in both the single-family and multifamily markets. Strength was geographically broad-based as well, with healthy growth in the South region, the largest U.S. market for home building.

At the same time, you'd be hard-pressed to describe the improvement as dramatic. Unlike the "V"-shaped recoveries we've seen after previous housing busts, this one is much more anemic. Why? Even though builders are running with very lean inventories, they don't need to ramp production up aggressively. For one thing, demand remains relatively weak despite very low mortgage rates. For another, so much foreclosed and distressed inventory is hitting the market that it makes it tough for builders to compete. Tighter financing conditions are an important headwind, too. Even those builders who want to build more homes, townhomes, and apartment complexes are having a difficult time getting the money to do so.

Bottom line: The "three steps forward, two steps back" recovery in housing remains on track. But it remains a weak one.

NAHB index falls in December

2009-12-15T12:55:00.003-05:00

The National Association of Home Builders released its latest builder sentiment index this afternoon. A look at the numbers follows:

* The overall index registered 16 in December. That was down from November's reading of 17 and below the 18 that economists were expecting.

* Among the sub-indices, the one measuring present single family sales slipped to 16 from 17. The prospective buyer traffic sub-index held steady at 13, while the sub-index measuring expectations about future sales fell to 26 from 28.

* Regionally speaking, we had a mixed bag again. The Northeast index rose to 23 from 20, while the West index climbed to 19 from 18. The Midwest index dropped to 12 from 14, while the South index held at 17.

It looks like the housing industry got a lump of coal in its stocking this year. The NAHB's index of builder sentiment slipped to its lowest level since June, with both current sales and expectations about future sales declining. Buyer traffic held steady. But it's still only a few points above the all-time low set in late 2008.

These figures underscore the gradual, tentative nature of the housing recovery. Elevated unemployment, tighter credit standards, and shaky buyer confidence are offsetting near-record affordability and low mortgage rates. The result is somewhat of a "push" -- with the housing market neither plunging to new lows nor experiencing a "V"-shaped recovery typical of what we've seen in past housing cycles.

30-year auction bombs; 2/30 spread hits record high

2009-12-10T13:15:00.000-05:00

Readers, you should be aware that the 30-year Treasury Bond auction today stunk up the joint. $13 billion in 30s were auctioned off at yield of 4.52%, 4 basis points worse than pre-auction talk.

Despite the recent rise in yields, demand was relatively punk, too — with indirect bidding falling to 40.2% from 44% in the prior month’s auction. The bid-to-cover ratio was up slightly to 2.45 (meaning there were $2.45 in bids for every $1 in bonds being offered). But that’s still low given the recent cheapening of the bond. Rick Santelli on CNBC gives this auction an “F+” I agree.

The key message from the bond market: Investors will buy short-term Treasuries six ways ’til Sunday. But amid record and rising debt issuance, Fed monetization of U.S. debt, and rising inflation fears, buyers just are NOT all that willing to lend Uncle Sam money at these yields for the long term. Indeed, the yield difference between 2-year and 30-year Treasuries blew out on the news to 372 basis points. That is the highest in the history of the Bloomberg data I have, which goes back to December 1980.

November jobs report a big UPSIDE surprise

2009-12-04T08:31:00.002-05:00

It's been a long time since we've had encouraging news on the jobs front. But boy did we get it this morning. The details:

* Employment fell by a paltry 11,000 in the month of November. That was much better than the expectation for a drop of 125,000. October's -190k reading was also revised up to only -111k, while September's -219k reading was bumped up to -139k.

* The unemployment rate actually FELL to 10% from 10.2%. That was better than the 10.2% forecast. The household employment survey, which is different from the business survey that gives you the headline jobs figure, actually showed a net GAIN of 227,000 jobs. We haven't seen a positive reading since April 2009 (+120,000) and a reading this strong since April 2008 (+234,000).

* Average hourly earnings were the weak link in the chain. They gained just 0.1%. That was down from 0.3% a month earlier and below forecasts for a reading of 0.2%. However, average weekly hours picked up to 33.2 from 33. That's the best reading we've seen since February.

* By industry, we saw a decent pop in service jobs (+58,000). The temporary help category has now shown three straight gains, including a sizable boost of 86,000 jobs. Education and health care has produced "Steady Eddie" gains (+40,000 in November). The weakness was in categories like construction (-27,000), manufacturing (-41,000), and retail trade (-15,000).

Beige Book shows broad economic stability. Nothing more. Nothing less.

2009-12-02T14:01:00.000-05:00

The latest Beige Book report on the state of the economy was just released by the Fed. The summary suggests we're seeing more stability and/or gradual improvement in the economy:

"Reports from the twelve Federal Reserve Districts indicate that economic conditions have generally improved modestly since the last report. Eight Districts indicated some pickup in activity or improvement in conditions, while the remaining four--Philadelphia, Cleveland, Richmond, and Atlanta--reported that conditions were little changed and/or mixed."

On housing, the report confirms my prediction months ago that the market was slowly but surely finding its footing. But the outlook for commercial real estate remains pretty awful. A brief excerpt:

"Residential real estate conditions were somewhat improved from very low levels, on balance, led by the lower end of the market. Most Districts reported some pickup in home sales, though prices were generally said to be flat or declining modestly; residential construction was characterized as weak, but some Districts did note some pickup in activity. Commercial real estate markets and construction activity were depicted as very weak and, in many cases, deteriorating."

Other nuggets of information: Retail sales have a better tenor. The job market still stinks, but is not getting worse. Lean inventories will likely need to be rebuilt. Lending conditions remain tight, while demand for new credit is anemic.

All in all, it's a "blah" report -- not so hot, not so cold.

Pending home sales rise again in October

2009-12-01T09:47:00.003-05:00

The National Association of Realtors just released data on pending home sales for October. A recap:

* Pending home sales rose 3.7%. That was much better than the 1% decline that economists were expecting.

* On a year-over-year basis, the pending sales index soared 31.8% to 114.1 from 86.6. That is the biggest annual increase on record and it leaves the index at a 43-month high.

* Regionally, sales climbed in three out of four regions. Sales rose 5.4% in the South, 11.6% in the Midwest and 19.9% in the Northeast. They fell 11.2% in the West.

The housing market continues to show signs of recovery. Pending sales easily topped estimates, with the index hitting its highest level since the waning days of the bubble in 2006. Also encouraging was the broad-based regional strength and the fact that sales held up despite the tax credit uncertainty pervading the market in October.

Moreover, there are reasons to expect the improvement to persist. Mortgage rates are falling again. Housing affordability is rising. And government support for the market looks like it'll continue until the proverbial cows come home. We can argue about the morality or wastefulness of those efforts until we're blue in the face. But the results are clear: They're helping to accelerate the recovery.

By the way, that recovery would have happened anyway because of falling home prices. Price declines are restoring affordability to a market that had gone mad. Or in simple terms: Falling home prices were never the problem here. They were always part of the solution.

New home sales jump 6.2% in October

2009-11-25T09:57:00.006-05:00

We just got a look at how the new home market fared in October. Here's a recap:

* New home sales spiked 6.2% to a seasonally adjusted annual rate of 430,000. That was up from 405,000 a month earlier and above forecasts for a reading of 404,000. The readings for the past few months were also revised higher by a net 7,000 units.

* Regionally it was a mixed bag. Sales fell 5.1% in both the Northeast and the West. They plunged 20% in the Midwest, but soared 23.2% in the South.

* The raw number of homes for sale continues to decline. It dropped to 239,000 from 250,000 in September. You have to go all the way back to May 1971 to find a lower level of new home inventory. The months supply at current sales pace indicator of inventory fell to 6.7 from 7.4. That's the lowest since December 2006. Meanwhile, the median price of a new home dipped 0.5% from a year earlier to $212,200.

The evidence continues to show stabilization in the housing market. Not a huge new bull market, mind you. But an end to the relentless flood of bad news we saw in 2006, 2007, 2008, and 2009.
In October specifically, sales rose by a greater-than-expected 6.2%. Home prices dropped by the smallest margin in almost a year. And the supply of new homes continued to plunge. New home inventory is now plumbing depths we haven't seen in 38 years. If you're looking for a sign that builders will need to start swinging their hammers again soon, this is it.

Elevated unemployment, tighter credit standards, and an ongoing influx of foreclosed, existing homes will ensure the recovery remains anemic. But it will be a recovery nonetheless.

October existing home sales blowout

2009-11-23T12:23:00.003-05:00

Sorry for the delay -- Had to do a video segment on the existing home sales numbers with CNBC, which can be viewed here. As I said in various forums six months ago, I believe the housing market has started to turn -- in construction, sales, inventory, but not in pricing (yet). The numbers continue to validate that thesis.

Specifically, existing home sales soared 10.1% in October. That was much better than the 2.3% increase in sales that was expected. At 6.1 million units, the seasonally adjusted annual rate of sales was the highest since February 2007.

Importantly, the supply of homes for sale dropped again -- by 14.9% year-over-year to 3.57 million. That is the lowest level since January 2007 and good for about 7 months of inventory at the current sales pace (down from 8 a month earlier). We are still oversupplied, and that's why median home prices fell 7.1% from a year earlier. But the excess inventory mountain is clearly shrinking.

We will clearly see some give back or "hiccup" in the numbers over the next couple of months as the lagged impact of the tax cut uncertainty makes its way into the numbers. But with the credit extended and expanded, the Fed continuing to manipulate the mortgage market, and the supply overhang shrinking, my forecast of stabilization remains on track. Or in plain English, the massive housing bust earthquake is behind us -- any setbacks from here on out will be more like mild aftershocks.

MBA: Q3 mortgage performance deteriorates ... again

2009-11-19T10:01:00.004-05:00

The Mortgage Bankers Association's figures on home loan performance just keep getting worse and worse. Here is what things looked like in Q3 2009:

* The overall mortgage delinquency rate surged to 9.64% in Q3 2009 from 9.24% in Q2 2009 and 6.99% a year earlier. Once again, this is a fresh record high for the data series, which goes back 37 years. For some historical perspective, the recent low for the delinquency rate was 4.31% in Q1 2005.

* Breaking it down by loan type, the subprime DQ rate rose to 26.42% from 25.35% a quarter earlier and 20.03% a year earlier. The prime-only DQ rate climbed to 6.84% from 6.41% in Q2 2009 and 4.34% a year earlier.

* And how about the "new subprime" behemoth -- the Federal Housing Administration? Delinquency rates there continue to march higher, rising to 13.9% from 13.62% a quarter earlier and 12.27% a year earlier. That's the worst FHA credit performance in U.S. history. The increase occurred despite a large increase in the overall number of FHA loans, which should lower the delinquency rate, all else being equal.

Like I said last quarter, the FHA program has become the "go to" place for borrowers who previously might have taken out subprime or Alt-A loans. By keeping lending standards incredibly lax (3.5% down payments anyone?) FHA is playing with fire. Grab your wallets taxpayers!

* The percentage of mortgages entering the foreclosure process resumed its climb, rising to a record high of 1.42% from 1.36% a quarter earlier. The overall percentage of mortgages in any stage of foreclosure climbed to 4.47% from 4.3%. Just over 14 out of every 100 loans in the U.S. are now distressed in one form or another, the most ever.

* Regionally, delinquency rates were still the worst in Mississippi at 14.4%. Nevada was a close second at 14%, followed by Georgia at 12.93% and Michigan at 12.64%. Florida had the highest percentage of loans in foreclosure at 12.74%, followed by Nevada at 9.44%.

Lousy mortgage performance continued into the third quarter. Both delinquency and foreclosure rates rose to new all-time records, with deterioration virtually across the board. The FHA loan program is now joining the Alt-A and prime markets in the woodshed, which just goes to show how silly it is to maintain lax lending standards in the midst of the worst housing downturn on record. Even the CEO of home builder Toll Brothers, Robert Toll, yesterday called FHA "a definite train wreck and the flag will go up in the next couple of months: Bail us out. Give us more money."

Going forward, aggressive modification programs and a nascent stabilization in the housing market will eventually lead to a turn in performance ratios. But this process will play out with a lag. And it goes without saying that nothing can change the fact we binged on real estate as a country ... and now we're paying a heavy price.

October housing starts, permits tank

2009-11-18T08:31:00.004-05:00

We just got the latest data on housing construction activity. Here's a recap:

* Overall housing starts plunged 10.6% to a seasonally adjusted annual rate of 529,000 in October from 592,000 in September. That was much worse than the 600,000 units that economists were expecting. Building permit activity was also weak. Permitting activity dropped 4% to 552,000 from 575,000. Economists were expecting a reading of 580,000.

* By property type, single family starts more than reversed the strong gain in September, falling 6.9%. Multifamily starts tanked 34.6%, though it's worth pointing out how volatile MF figures can be. Single family permits dropped 0.2%, while multifamily permits fell 17.9%.

* What about the regional breakdown? Negative across the board for starts. They fell 8.5% in the West, 9.6% in the South, 10.6% in the Midwest and 18.8% in the Northeast. Building permit activity was marginally better, with declines of 5.8% in the South and 6.7% in the West. Permits were flat in the Northeast and up 2% in the Midwest.

Here's the housing mantra I want to keep repeating: "Three steps forward, two steps back." That is how I have said the housing recovery would play out, and that is, in fact, how it's progressing. The latest starts figures are no exception. Perhaps out of fear of the expiration of the home buyer tax credit, builders pulled back on both starts and permits in October. The hit was particularly severe in the volatile multifamily sector. But even the single family market fell in a ditch.

As bad as the monthly report was, however, starts are still above the absolute low for this cycle (479,000 in April for overall starts, 357,000 for single-family). Builders also have just 251,000 new homes for sale. That's the lowest level since November 1982, which tells me a pick up in construction is inevitable.

On the demand front, the tax credit has been extended and expanded. The Federal Reserve's manipulation of the mortgage market is keeping financing costs down. And improving affordability in many markets -- thanks to plunging prices -- is slowly bringing buyers out of the woodwork.

So yes, the bubble days are long gone. They won't be coming back for several years. But I still believe we will see a slow, steady recovery in sales ... a gradual decline in the number of homes on the market ... a tepid rebound in home construction ... and broad-based stabilization in home prices as we head later into 2010. Yesterday's NAHB report, and this morning's construction data, makes sense when viewed in that context.

NAHB index flat in November

2009-11-17T13:00:00.003-05:00

The National Association of Home Builders just released its latest builder sentiment index. The reading came in at 17. That was unchanged from a downwardly revised 17 in October and slightly below the 19 number economists were expecting.

Among the sub-indices, the one measuring present single family sales was unchanged at 17. The prospective buyer traffic sub-index held at 13, while the sub-index measuring expectations about future sales rose to 28 from 26. Regionally speaking, it was a mixed bag. The Northeast index dropped sharply to 19 from 25, but the West index jumped to 19 from 14. The Midwest index fell to 14 from 17, while the South index was unchanged at 17.

The"three steps forward, two steps back" housing market recovery remains on track. But as I've noted numerous times, it won't be a robust rebound. The home buyer tax credit is helping bolster demand, as is the Federal Reserve's manipulation of the mortgage market. Improving affordability in many markets -- thanks to plunging prices -- is also bringing buyers out of the woodwork.

But the bubble days are long gone, and won't be coming back for several years. Instead, we'll see a slow, steady recovery in sales ... a gradual decline in the number of homes on the market ... a tepid rebound in home construction ... and broad-based stabilization in home prices as we head later into 2010. The latest NAHB report makes sense when viewed in that context.