Interest Rate Roundup

Monday, February 28, 2011

Pending home sales slip in January

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).

Thursday, February 24, 2011

New home sales tank in January

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.

Wednesday, February 23, 2011

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

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.

Wednesday, February 16, 2011

Housing starts surge, permits slump in January

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.

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