Interest Rate Roundup

Wednesday, November 24, 2010

New home sales drop in October

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.

Tuesday, November 23, 2010

Existing home sales slip in October

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.

Wednesday, November 17, 2010

Housing starts slump to near-record low

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.

Tuesday, November 16, 2010

NAHB index rises in November

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.

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