Interest Rate Roundup

Thursday, July 28, 2011

Pending home sales rise in June

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.

Tuesday, July 26, 2011

New home sales slip in June; Pricing weak

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!

Wednesday, July 20, 2011

Existing home sales slip in June

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.

Tuesday, July 19, 2011

Housing starts pop in June

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.

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