CR: Existing Home Sales in April: 4.97 million SAAR, 5.2 months of supply

Existing Home Sales in April: 4.97 million SAAR, 5.2 months of supply

by Bill McBride on 5/22/2013  

NOTE: Federal Reserve Chairman Ben Bernanke testimony Testimony by Chairman Bernanke on the economic outlook 

The NAR reports: April Existing-Home Sales Up but Constrained

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 0.6 percent to a seasonally adjusted annual rate of 4.97 million in April from an upwardly revised 4.94 million in March. Resale activity is 9.7 percent above the 4.53 million-unit level in April 2012.

Total housing inventory at the end of April rose 11.9 percent, a seasonal increase to 2.16 million existing homes available for sale, which represents a 5.2-month supply at the current sales pace, compared with 4.7 months in March. Listed inventory is 13.6 percent below a year ago, when there was a 6.6-month supply, with current availability tighter in the lower price ranges.

Click on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in April 2013 (4.97 million SAAR) were 0.6% higher than last month, and were 9.7% above the April 2012 rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory increased to 2.16 million in April up from 1.93 million in March.   Inventory is not seasonally adjusted, and inventory usually increases from the seasonal lows in December and January, and peaks in mid-to-late summer (so some of this increase was seasonal).

The last graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

 Inventory decreased 13.6% year-over-year in April compared to April 2012. This is the 26th consecutive month with a YoY decrease in inventory, but the smallest YoY decrease since 2011 (I expect the YoY decrease to get smaller all year).

Months of supply increased to 5.2 months in April.

This was  just below expectations of sales of 5.0 million.  For existing home sales, the key number is inventory – and inventory is still down sharply year-over-year, although the declines are slowing.   This was a solid report.  I’ll have more later …

Read more at http://www.calculatedriskblog.com/2013/05/existing-home-sales-in-april-497.html#jOuSfqHdtIQ06j4D.99

CR: Lumber Prices decline Sharply over last month

Lumber Prices decline Sharply over last month

by Bill McBride on 5/20/2013  

Just over a month ago I mentioned that lumber prices were nearing the housing bubble highs. Since then prices have declined sharply, with prices off about 20% from the recent highs.

Some of the decline could be related to additional supply coming on the market, and some due to less buying from China (several sources are reporting that China has pulled back significantly on buying North American lumber).

On additional supply, two months ago the WSJ had an article about some producers increasing supply:

Georgia-Pacific, the largest U.S. producer of plywood … plans to invest about $400 million over the next three years to boost softwood plywood and lumber capacity by 20%.

Click on graph for larger image in graph gallery.

This graph shows two measures of lumber prices (not plywood): 1) Framing Lumber from Random Lengths through last week (via NAHB), and 2) CME framing futures.

Lumber prices are now 20% off the recent highs.

Read more at http://www.calculatedriskblog.com/2013/05/lumber-prices-decline-sharply-over-last.html#UyI6GKlagaM8APOV.99

Is the new kind of real estate investor to blame for the falling home ownership rate?

Is the new kind of real estate investor to blame for the falling home ownership rate? The current data on investor purchases, home ownership, and all cash purchases.

One piece of housing information that warrants a deeper analysis is the continually falling home ownership rate.  Since the recession hit over 5,000,000 Americans have gone through the process of foreclosure.  Yet for over a year now, the housing market has been recovering with lower interest rates, higher home prices, and a record low amount of inventory.  Yet even on the national inventory front, it does look like some pressure is being released on this end.  US housing starts are bouncing from the bottom and this will add much needed relief on the inventory side.  However, this doesn’t answer why the home ownership rate has fallen so hard.  Trying to explain the dichotomies in the housing market is like trying to wrap your head around dark matter.  Sure, those that went through a foreclosure are likely now in rental housing.  But as foreclosures become a smaller part of the market, why does the rate continue to fall like dominoes falling over one another with momentum?  And the term “investor” has definitely shifted in the last few years.  Let us take a look at the overall trends first.

The shift in investors

The peak year in home sales was in 2005 when over 8,000,000 new and existing home sales took place:

Keep in mind the above focuses on transactions.  It was the case that some homes were being sold multiple times in one year given how hot the market was and how easy it was to get a loan (this applies to 2003 through 2007).  But look at the amount of investment purchases in 2005 (over 2,000,000).  Even in 2012 when investors essentially dominated the market, it was about 1,000,000.  So why does it feel like investors are more dominant today?  First the amount of supply is low:

Months of housing supply is still near record lows (at 4 months of inventory).  Yet overall sales are definitely picking up reaching 5,000,000 in 2012 and we are on pace for 5.4 to 5.6 million this year combining existing and new home sales.  So why is the home ownership rate still falling?  There are a few reasons:

-Shift in investors:  Many prior investors were regular buyers purchasing second homes to either flip or try to rent.  So you had many that had one, two, or more properties but the owner was one person.

-Foreclosures still occurring:  People are still losing their homes.

-One and done transactions:  Many of the modern day investors are big hedge funds.  So you have one large entity owning 100, 500, 2000, or even more properties under one name.

I think the last item is probably the big difference here.  The shift to all cash purchases shows big money has moved strongly into the rental business.  Some of the big investors are looking at buy and hold strategies that will keep inventory off the market for a few years versus the buy and flip investors from the last housing boom.

When you buy 1000 properties, you don’t have it under individual names.  It is registered likely under one entity.  This is adding to the change.  But also, a larger portion of Americans are renting because of their financial situation or because of a change in preferences.  Many younger Americans are still trying to find their footing in this economy and many carry mountains of student debt.  It will be interesting to see if younger Americans carry similar desires of home ownership as the previous generation.

The all cash buyers

Another big point is the investors of the last boom did not have the capital to buy their investments.  In fact, most were leveraging all the way.  Although the last boom obviously saw more investor action, it was more of the mom and pop variety.  We can see this with the all cash purchase activity:

Notice that in 2005, the peak of “investor” buying, all cash purchases were rather low in highly speculative markets.  Orlando was below 10 percent in 2005 but in 2010, 2011, and 2012 the rate was above 50 percent for all cash purchases.  You can see the boom of all cash investors.  In Southern California, the figure has been above 30 percent for a couple of years now.

This is why you have an increase in home sales yet the overall home ownership rate continues to look like this:

There are a few reasons for the drop but it is clear that bulk buying of properties from Wall Street for renting purposes has caused supply to drop, prices to increase, and the home ownership rate for Americans to drop.  As someone mentioned in an e-mail, what use is a great mortgage rate when investors are outbidding and overbidding regular buyers?  We are now five months into the year and the trend continues to move on.  We are seeing a shift in inventory nationwide and also, some larger investors are losing their appetite as yields get squeezed.  However, housing starts have picked up significantly since the bottom:

This is crucial given the very low level of inventory.  However housing starts are a leading indicator here because it will take some time before this inventory hits the market.  I think the above information does add some clarity as to why the home ownership rate continues to decline in spite of rising home sales, higher home prices, and what appears to be another boom in the housing market.

CR: Housing Starts decline sharply in April to 853,000 SAAR

Housing Starts decline sharply in April to 853,000 SAAR

by Bill McBride on 5/16/2013 

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in April were at a seasonally adjusted annual rate of 853,000. This is 16.5 percent below the revised March estimate of 1,021,000, but is 13.1 percent above the April 2012 rate of 754,000.

Single-family housing starts in April were at a rate of 610,000; this is 2.1 percent below the revised March figure of 623,000. The April rate for units in buildings with five units or more was 234,000.

Building Permits:
Privately-owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 1,017,000. This is 14.3 percent above the revised March rate of 890,000 and is 35.8 percent above the April 2012 estimate of 749,000.

Single-family authorizations in April were at a rate of 617,000; this is 3.0 percent above the revised March figure of 599,000. Authorizations of units in buildings with five units or more were at a rate of 374,000 in April.

 Click on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) decreased sharply in April following the sharp increase in March (Multi-family is volatile month-to-month).

Single-family starts (blue) declined to 610,000 in April (Note: March was revised up from 619 thousand to 623 thousand).

The second graph shows total and single unit starts since 1968.

 This shows the huge collapse following the housing bubble, and that housing starts have been generally increasing after moving sideways for about two years and a half years.

This was well below expectations of 969 thousand starts in April, mostly due to the sharp decrease in multi-family starts.  Total starts in April were only up 13.1% from April 2012; however single family starts were up 20.8% year-over-year.  I’ll have more later …

Read more at http://www.calculatedriskblog.com/2013/05/housing-starts-decline-sharply-in-april.html#8HKI8RCPXZelZDt8.99

Residential Remodeling in March 2013 down 10%

Residential Remodeling in March 2013

National Residential Remodeling

Residential remodels authorized by building permits in the United States in March were at a seasonally-adjusted annual rate of 2,731,000. This is 10 percent below the revised February rate of 3,026,000 and is 4 percent below the March 2012 estimate of 2,831,000.

Regional Residential Remodeling

Seasonally-adjusted annual rates of remodeling across the country in March 2013 are estimated as follows: Northeast, 577,000 (down 13% from February and down 25% from March 2012); South, 1,718,000 (up 51% from February and up 60% from March 2012); Midwest, 552,000 (down 21% from February and down 17% from March 2012); West, 532,000 (down 34% from February and down 21% from March 2012).

Viewing the Economic Recovery Through Remodeling

“Residential remodeling in March dropped significantly from February–except in the South, where it dramatically increased–indicating that we will likely continue to see a higher-than-normal amount of volatility around the number of permitted remodeling projects,” said Joe Emison, Chief Technology Officer at BuildFax.

About the BuildFax Remodeling Index

The BuildFax Remodeling Index (BFRI) is based on construction permits for residential remodeling projects filed with local building departments across the country.  The index estimates the number of properties permitted.  The national and regional indexes are based upon a subset of representative building departments in the U.S. and population estimates from the U.S. Census.  The BFRI is seasonally-adjusted using the X12 procedure. For more details and historical index values, please visithttp://index.buildfax.com/.

About BuildFax

BuildFax is the creator of the first and only national database of historical building permit data. Headquartered in Asheville, North Carolina, BuildFax has created a proprietary property intelligence engine that contains building and permitting information from 5,000+ cities and counties throughout the country. As the best and only source of a structure’s “life story,” the BuildFax database continues to grow, currently covering over 60 percent of the U.S. commercial and residential building stock with over 6 billion data points.

UC: Wood products set record

Wood products set record

May 7, 2013

By Rick Sohn,

Umpqua Coquille LLC

Wood products set records in April and pushed all prices higher, as log shortages still are  an issue. Housing starts finally broke through 1 million for the first time in 5 years.  Seven-year trend of lumber, logs, housing, and mortgage statistics are shown below.

$445 for studs is higher than any number I can remember.  But looking closely at weekly reports:

$395 on March 15

$430 on March 22

$452 on  March 29

$460 on April 5 and 12

$445 on April 19

$415 on April 26

Random Lengths printed a high of $417 as a monthly average in March, 2005.  This “Timber industry Reports” usually uses the third week of the month.  Normally, prices of lumber above $400 are very short-lived but have been going now for 6 weeks.  Current issues of Random Lengths report price weakness, but weakness that is still above $400 is an exceptionally strong number by historic standards.  These prices happen because basic production infrastructure cannot keep up with demand, for product.  For simplicity, this report tracks studs, but other products are also following suit.    Two lessons here:  No rest for lumber salesmen, and  low cost studs at the big boxes may be a thing of the past,  for now.

With such a strong spike in stud prices, the March stud number is well over 50% of the log number, so good money is being made by mills, as well as by the timberland owners.  A steep drop in both stud and log prices can be expected, as the increased supply of logs from summer road systems becomes a factor. Log sellers tell me that these decreases in price will be more evident when reported next month.

Housing starts are setting a new high, again, finally surpassing 1 million starts annualized – the first time since June, 2008.  This is another important milestone.  More markets are becoming seller’s markets. Unsold inventory is hovering around very healthy levels.  The 30-year fixed rate mortgage is stabilized, moving slowly upward, each month.

Zillow median home value prices are interesting.   A study of these numbers shows a significant lag in the low price, compared to the other measures in this report.  The low reported in in 2012, fully 3 years after the housing starts, building permits and stud and log prices hit their lows.  Of course, many factors contribute to the lagging home prices, not the least of which is the SLOWNESS of the recovery.

One of our next milestones will be when housing starts and building permits both print above 1 million units in the same month.

Data reports used with permission of:

¹Random Lengths.  Through Sept. 2012, 2”x4”x8’ precision end trimmed hem-fir stud grade from Southern Oregon mills.  Starting Oct. 2012 the stud grade was consolidated with and is now reported as  Kiln Dried Studs, Coast Hem-Fir 2x4x8’ PET #2/#2&Btr. Price reported is Dollars per Thousand Board Feet, generally the third week of the month.  One “board foot” of product measures 12 inches by 12 inches by one inch thick.

²RISI, Log Lines.   Douglas-fir #2 Sawmill Log Average Region 5 price.  Current report is for the prior month.  Dollars per Thousand Board Feet of logs are reported using standardized log measurements from the “Scribner log table,” which includes expected saw trim.  This is much larger than a product board foot.

³ Dept. of Commerce, US Census Bureau.   New Residential Housing Starts and New Residential Construction Permits, seasonally adjusted, annual rate.  Current report is for the prior month.   Recent reports are often revised in bold.  Also, major revision made each May, reaching 2 1/2  yrs back.

⁴Regional Multiple Listing Service RMLS^TM  data, courtesy of Janet Johnston, Prudential Real Estate Professionals  Broker, Roseburg, OR.  Inventory of Unsold Homes (Ratio of Active Listings to Closed Sales) in Portland Oregon, for most recent month available.

⁵Freddie Mac.  Primary Mortgage Market Survey.  30-year Fixed Rate Mortgages Since 1971, national averages.  Updated weekly, current report is for the prior full month.

⁶Mortgage-X Most recent weekly rate of 30-year Fixed Rate Mortgages, national average.

⁷Zillow.com Median value of homes sold in the United States during the month, weighted according to the population of each area.  The Median is the  midpoint value with  equal numbers of homes selling above and below this value each  month.  Medians tend to remove the effect of outlier values.Revisions in bold

Issue  #6-4.   © Copyright Rick Sohn, Umpqua Coquille LLC.  , e-mail rsohn@umpquacoquille.com

HW: Big-Ticket Remodeling Activity Up 1.1% in 1Q: Metrostudy

Big-Ticket Remodeling Activity Up 1.1% in 1Q: Metrostudy

Number of projects, dollars to be spent now expected to climb 1.9% this year

By Craig Webb

  

Remodeling and replacement activity nationwide did better than previously expected in the first quarter and remains on a steady upward path over the next three years, Metrostudy, a Hanley Wood company, projected today inits latest Residential Remodeling Index (RRI).

The first quarter’s index of 86.3 is a 1.1% improvement from the revised score of 85.3 in the final three months of 2012. It also marks the fifth straight quarter of improvement since remodeling activity bottomed out in the summer of 2011 at 82.0.

The index is calibrated against remodeling activity in the first quarter of 2007, so the latest RRI means the nation’s remodelers are doing 86.3% as much business as they were six years previously. The RRI won’t top 100 until the third quarter of 2016, Metrostudy now believes.

In terms of projects and money, Metrostudy now forecasts activity will increase 1.9% this year to 10.3 million projects while spending on those jobs will climb by the same 1.9% to $140.7 billion.

“Once we received and tallied all of the permits and reported projects in 2012, we found that 2012 ended far stronger than originally estimated in January,” remarked Jonathan Smoke, Hanley Wood’s chief economist. “And with our first read of activity in the first quarter of this year, we are seeing that the remodeling market started the year without skipping a beat. There had been a fear that the economy would fall in the first quarter and pull down home improvement activity but instead we are seeing remodeling and replacement start the year strong, just as home sales, home prices, and new construction has also started 2013.”

Metrostudy estimates that 331 out of 366 Metropolitan Statistical Areas (MSAs) will show growth in project activity for 2013, with the average growth in activity in these recovering markets of 3%. The current top 10 best markets for remodeling are Buffalo, N.Y.; San Antonio; Houston; Dallas; Austin, Texas; Pittsburgh; Oklahoma City; Denver; Charlotte, N.C.; and Indianapolis.

The RRI covers the 366 MSAs and takes in home improvement and replacement projects worth at least 500. The index is seasonally adjusted.