Interest Rate Roundup

Monday, March 28, 2011

Pending home sales climb in February

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.

Wednesday, March 23, 2011

New home sales implode in February

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.

Monday, March 21, 2011

Existing home sales slump in February

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.

Wednesday, March 16, 2011

Housing starts tank in February

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.

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