Interest Rate Roundup

Friday, February 26, 2010

Existing home sales tank in January

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.

Wednesday, February 24, 2010

New home sales plunge to record low

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.

Tuesday, February 23, 2010

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

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.

Friday, February 19, 2010

MBA: Q4 delinquencies down, foreclosures up

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.

Wednesday, February 17, 2010

Housing starts pop, permits fall in January

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.

Tuesday, February 16, 2010

NAHB index rises to 17 in February

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.

Thursday, February 11, 2010

Another ugly Treasury auction!

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!

Tuesday, February 02, 2010

Pending home sales inch up in December

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.

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