Category Archives: Housing

CR: Housing Starts increase in May to 914,000 SAAR

Housing Starts increase in May to 914,000 SAAR

by Bill McBride on 6/18/2013 08:30:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in May were at a seasonally adjusted annual rate of 914,000. This is 6.8 percent above the revised April estimate of 856,000 and is 28.6 percent above the May 2012 rate of 711,000.

Single-family housing starts in May were at a rate of 599,000; this is 0.3 percent above the revised April figure of 597,000. The May rate for units in buildings with five units or more was 306,000.

Building Permits:
Privately-owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 974,000. This is 3.1 percent below the revised April rate of 1,005,000, but is 20.8 percent above the May 2012 estimate of 806,000.

Single-family authorizations in May were at a rate of 622,000; this is 1.3 percent above the revised April figure of 614,000. Authorizations of units in buildings with five units or more were at a rate of 374,000 in April.

Total Housing Starts and Single Family Housing StartsClick 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) increased in May following the sharp decrease in April (Multi-family is volatile month-to-month).

Single-family starts (blue) increased slightly to 599,000 SAAR in May (Note: April was revised down from 610 thousand to 597 thousand).

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

Total Housing Starts and Single Family Housing StartsThis 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 below expectations of 950 thousand starts in May.  Total starts in May were up 28.6% from May 2012; however single family starts were only up 16.3% year-over-year.  I’ll have more later …

Read more at http://www.calculatedriskblog.com/2013/06/housing-starts-increase-in-may-to.html#fAlroSTqdHu1xKy8.99

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Dr HousingBubble: 4 current trends in the housing market

4 current trends in the housing market: Rents holding steady nationwide, young home buyers, bidding war trends, and going after strategic defaulters.

The big motivation for large real estate investors was the yield they could potentially receive from purchasing real estate in depressed markets.  Early adopters entered the market in 2008 and 2009 and by 2010 the market was flood by big money investors.  Today we are seeing a saturation in terms of investors and yields are not worth the time for many large funds.  For example, rents in Arizona and Nevada are down from where they were in 2010 in spite of the rapid rise in housing values.  It could be because there is a saturation of rentals in these markets or simply because incomes are weak in these areas.  One thing is certain and some investors are losing their appetite for rental real estate.  Another interesting trend involves higher inventory and subsequently and ease in the volume of bidding wars.  What are some of the trends in the current housing market?

Rental analysis

us rent prices

One interesting trend is the large rise in rents for New York since 2010.  Los Angeles rents appear to be steady or falling somewhat according to the median list price.  The rental trend in Los Angeles appears the same as it does for the nation.

What is interesting is when comparing housing values:

zillow home price index

Los Angeles is one of the markets that has turned around quickly.  The trend isn’t evenly distributed as the chart above highlights.  The big jump in New York rents is interesting since home values according to the above seem to be fairly stable.  Unlike Arizona and Nevada with falling rents and incredible jumps in home values, New York would seem to justify a move up in prices when looking at rents.

The young and in debt

Americans overall receive a large portion of their reported net worth through real estate equity.  Since many young Americans bought near or at the peak, they never really had the chance to accumulate any equity growth.  Many also bought with FHA insured mortgages or low down payment loans stretching their budgets.  Because of this, net worth for older households has largely recovered from the peak but for younger households, they are still down by a whopping 40 percent from the peak:

age of household net worth

Source:  New York Times

The main reason?  Negative equity.  The debt still remains connected to peak housing values and while stocks are near record levels, real estate values nationwide still have a long way to go to reach those previous peaks.

Bidding wars easing up

Redfin has an interesting report on bidding wars. Of course the most competitive markets seem to be in California.  Take a look at the bidding war trend:

redfin bidding wars

Source:  Redfin

The main reason for this?  The largest monthly inventory increase in three years might help to ease off some of the insanity in the current market.   This might offer some wiggle room around the country but the heat is still on in manic California:

competition markets

Look how crazy the San Francisco market is in terms of competition.  In May, over 96 percent of winning bids were over asking price!  Orange County and San Diego had very high numbers here as well.  So if you are out there in this mania and are losing out, this is probably why.

Going after strategic defaulters

A large number of people strategically defaulted during the height of the bust and many thought they were off free and clear.  Now that prices are up, banks are looking into those strategic defaults from the past:

“(WaPo) [Freddie Mac spokesman Brad German] said Freddie Mac is targeting “strategic defaulters,” which the agency defines as “someone who had the means but chose to go into default, that there were no extenuating circumstances that affected their ability to pay. If you’re choosing not to pay off your mortgage, but you’re paying other bills, we would consider that strategic default.”

In 2011, Fannie and Freddie flagged 12 percent of 298,327 properties they had foreclosed on — more than 35,000 — for deficiency judgments in an attempt to collect $2.1 billion in unpaid mortgage debt, according to an inspector general’s report released in October from the Federal Housing Finance Agency.”

Americans seemed to be shocked that data was being collected on them while they post their entire lives chronicled by the minute on Facebook voluntarily.  So it should be no surprise that our GSEs were also tracking those strategic defaulters.  Now that times are good and equity is back up, you might be receiving a letter if you strategically walked away from your mortgage and had assets in other investment vehicles.

The trends suggest that rents are tight because incomes are tight.  You also see that bidding wars might be reaching an apex in terms of manic fever in some markets.  In the end, the momentum is still on the upside but for how long?  Can the Fed continue to purchase MBS and risk inflating that $3.3 trillion balance sheet even further?  The fact that inventory is rising is a good sign for most Americans.

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CR: Housing bubble: The “Wealth” is Gone, but the Debt Remains

Housing bubble: The “Wealth” is Gone, but the Debt Remains

by Bill McBride on 6/14/2013 02:00:00 PM

THE total wealth of American households has recovered from the financial crisis and Great Recession, according to the Federal Reserve Board. But … many Americans, particularly younger adults who took on heavy debt to acquire homes before the housing bubble collapsed, are lagging.

During the housing boom, said William R. Emmons, the chief economist of the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis, “exactly the people you would think need to act conservatively were doing the opposite.” Homeownership rates, and mortgage debt levels, rose for younger households, as well as for less educated and minority ones. Those groups suffered more during the crisis, he said, and have been slower to recover.Mr. Emmons compiled average wealth figures for different groups from the triennial surveys … older households are down just 3 percent on average, while those headed by middle-age people are down about 10 percent. But the decline is nearly 40 percent for the younger group.

During the housing boom, households ended up with more of their wealth in real estate than before, and mortgage debt rose to record levels relative to the size of the economy. The proportion of wealth in homes is now back to close to the level of the 1990s, but the debt levels remain high by historical standards.
emphasis added

Household Real Estate Assets Percent GDPClick on graph for larger image.

This graph based on the Fed’s Flow of Funds report shows household real estate assets and mortgage debt as a percent of GDP.

As Norris noted, the bubble wealth is gone, but the debt remains (still high on a historical basis). This was especially hard on younger households since they bought during the housing bubble.

Read more at http://www.calculatedriskblog.com/2013/06/housing-bubble-wealth-is-gone-but-debt.html#5ebCmySFJbleFrzC.99

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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.

Total Housing Starts and Single Family Housing Starts 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.

Total Housing Starts and Single Family Housing Starts 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

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CR: HVS: Q1 2013 Homeownership and Vacancy Rates

HVS: Q1 2013 Homeownership and Vacancy Rates

by Bill McBride on 4/30/2013 

The Census Bureau released the Housing Vacancies and Homeownership report for Q1 2013 this morning.

This report is frequently mentioned by analysts and the media to track the homeownership rate, and the homeowner and rental vacancy rates.  However, there are serious questions about the accuracy of this survey.

This survey might show the trend, but I wouldn’t rely on the absolute numbers.  The Census Bureau is investigating the differences between the HVS, ACS and decennial Census, and analysts probably shouldn’t use the HVS to estimate the excess vacant supply, or rely on the homeownership rate, except as a guide to the trend.

Homeownership Rate Click on graph for larger image.

The Red dots are the decennial Census homeownership rates for April 1st 1990, 2000 and 2010. The HVS homeownership rate decreased to 65.0%, down from 65.4% in Q4.

I’d put more weight on the decennial Census numbers and that suggests the actual homeownership rate is probably in the 64% to 65% range.

Homeowner Vacancy RateThe HVS homeowner vacancy rate was increased to 2.1% in Q1 from 1.9% in Q4.

The homeowner vacancy rate has peaked and is now generally declining, although it isn’t really clear what this means. Are these homes becoming rentals? Anyway – once again – this probably shows that the trend is down, but I wouldn’t rely on the absolute numbers.

Rental Vacancy RateThe rental vacancy rate declined in Q4 to 8.6%, from 8.7% in Q4.

I think the Reis quarterly survey (large apartment owners only in selected cities) is a much better measure of the overall trend in the rental vacancy rate – and Reis reported that the rental vacancy rate has fallen to the lowest level since 2001.

The quarterly HVS is the most timely survey on households, but there are many questions about the accuracy of this survey. Unfortunately many analysts still use this survey to estimate the excess vacant supply. However this does suggest that the housing vacancy rates have declined sharply.

Read more at http://www.calculatedriskblog.com/2013/04/hvs-q1-2013-homeownership-and-vacancy.html#TkBWIoQoKuxIY0rc.99

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PIMCO: The U.S. Housing Market’s Road to Recovery: Slower Speed Limits and Stricter Enforcement

The U.S. Housing Market’s Road to Recovery: Slower Speed Limits and Stricter Enforcement

Michael CudzilDaniel H. Hyman

Picture a six-lane highway with roughly 110 million cars. The posted speed limit is 55 miles per hour, but there is not a police officer in sight. Since there have not been any major accidents in years, it is common practice to travel at 90 miles to 100 miles per hour, and insurance companies are lowering their premiums – often regardless of the state of the cars.

That describes the U.S. mortgage market from 2003 to 2006. The story ended exactly as you would imagine: a massive accident with severe repercussions not just for housing, but also for the financial system and the global economy.
Today, the six-lane highway has been reduced to three lanes, as origination capacity has been halved. One is a fast-pass lane for customers who have been sitting in traffic the past couple of years and are now being rewarded for good behavior with access to historically low mortgage rates: the HARP lane. (The Home Affordable Refinance Program helps homeowners refinance who are underwater or near-underwater but current on their mortgages.) But for everyone else, the speed limit has been reregulated to 35 miles per hour. There are police officers at every mile marker, and the insurance companies are charging much higher premiums.
Where do we go from here?
Despite fewer lanes on the mortgage highway, we believe the U.S. housing market has bottomed and is showing clear signs of a gradual and broadening recovery. The upward trajectory of housing prices should continue at a moderate pace. Over the past 100 years, housing has appreciated at roughly the rate of inflation. It is only in the past 10 years that housing has traded with substantial volatility due to leverage and “affordability” products. We believe the tailwinds are in place for an 8%–12% appreciation in housing over the next two years. Over the longer term, we expect a return to historical normal performance for housing relative to the rate of inflation.
We consider several dynamics in developing our outlook on housing: household formation, inventories, affordability and access to credit and lending.

Read More …

 
Conclusion
We remain constructive on the state of the housing market but recognize the road is far from smooth.
On balance, we believe the positives outweigh the negatives and look for housing to appreciate 8%–12% over the next two years. Housing should have positive influences on consumer confidence and labor mobility.
In terms of investment implications, we believe both agency and non-agency markets offer opportunities to generate excess returns, while active management should be able to add value to structural allocations. Agency mortgage securities offer liquid investments that can be traded against each other as well as against other liquid interest rate markets, specified mortgage pools and, less frequently, structured mortgage products.
Non-agency mortgages continue to offer the best risk-adjusted returns in the sector, but specific security selection will matter much more given their recent high returns. Compared to investing directly in real estate, which requires time to close, lawyers, insurance and transaction costs, non-agency mortgages offer similar returns without the friction. Pairing non-agency mortgages with agency mortgage-backed securities potentially provides an attractive return profile across a wide range of economic outcomes.

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CR: Lawler: How Much Has the Single Family Housing Market Shifted to Rentals (in numbers)?

Lawler: How Much Has the Single Family Housing Market Shifted to Rentals (in numbers)?

by Bill McBride on 4/24/2013

From economist Tom Lawler:

While good, reliable, consistent, and timely government data on the housing stock and housing tenure do not exist, the limited data available suggest that over the last few years (1) there has been a sizable increase in the number of SF housing units occupied by renters; (2) a decent-sized decline in the number of SF housing units occupied by owners; and (3) this trend began several years ago, and several years before widely-publicized “institutional” investor buying emerged.

Estimates of the SHARE of SF housing units occupied by owners vs. renters are available from the American Community Survey annually from 2006 through 2011 and biennially from the American Housing Survey through 2011, and “imprecise” estimates of the owner vs. renter share of “one-unit” structures can be derived from the detailed tables of the Housing Vacancy Survey through 2012 – though rental and homeowner vacancy rates for “one-unit” structures in the HVS include not just SF detached and attached homes but also manufactured/mobile homes. All three surveys show a substantial increase in the share of SF/one-units occupied homes occupied by renters from 2007 to 2011, and the HVS data show a continued share increase in 2012. Both the AHS and the HVS, however, appear to overstated significantly overall homeownership rates (based on a comparison to decennial Census results), while the ACS homeownership rates seem more consistent with decennial Census data. As such, I believe the ACS data on the renter share of the SF housing market is superior to the AHS and HVS data.

Rental Share Single Family Housing Market Click on graph for larger image.

Note: The estimate for 2012 is based on the 2012 vs. 2011 change in the HVS estimate of the renter share of occupied “one-unit” structures.

Translating the ACS share data to numbers, however, requires a little work. First, the numbers for households in the annual ACS results are “benchmarked” to the latest available housing stock estimate for that year, and there have been significant upward revisions in housing stock estimates. Second, the latest available “official” housing stock estimates do not incorporate post-Census analyses of the estimated “undercount” of housing units in the “official” Census numbers. And finally, the ACS appears to overstate the overall housing vacancy rate, though by less than the HVS or AHS. Unfortunately, adjusted for this last factor is difficult, since the degree of the vacancy rate “overstatement” is only available for 2010. As such, I only adjusted the ACS estimates for more reasonable estimates of the housing stock (incorporating the Census 2000 HUCS and the Census 2010 CCM).

Making this adjustment, and using estimates for the 2012 ACS data based on HVS results, it would appear that from 2007 to 2012 the number of SF detached and attached homes that were occupied by renters increased by about 2.6 million, while the number of SF detached and attached homes that were occupied by owners declined by about 1.3 million. The largest increase in both the number and the share of renter-occupied SF homes appears to have been in 2009.

Since “active” investor buying of SF homes that were then rented out has been going on for many years, why has the media only recently begun to focus intently on this “trend? First, investor buying in earlier years occurred when for-sale inventories (and REO inventories) and the pace of foreclosure were high, the economy in general and labor markets in particular were extremely weak, and there were no signs either of a housing “recovery” or improving home prices. Second, last year a number of large institutional firms very publicly announced plans to ramp up purchases of SF homes as rental properties. Third, their ramped-up buying came when overall inventories of existing home for sale, and especially “distressed”/REO properties for sale, had fallen sharply, as well as when an improved economy and record-low mortgage rates were producing a modest increase in potential demand from folks wanting to buy a home to live in. (Folks love anecdotal stories about how investors are “out-bidding” or “crowding out” first-time home buyers!)

And finally, their (and other) aggressive buying in the face of sharply lower inventories (large institutional investors appear to have lower “hurdle rates” than “traditional” investors) has helped fuel a significant recovery in home prices in many parts of the country (oh my, more “de-stickification!”)

All-Cash Share of Home Sales (Yearly Totals)
Phoenix Tucson California* Florida SF Florida C/TH Knoxville Omaha
2007 11.6% 12.6% 10.3% N/A N/A 12.4% N/A
2008 12.6% 18.8% 18.7% 25.5% 43.6% 15.2% 12.1%
2009 37.2% 23.9% 26.3% 36.8% 64.0% 17.8% 11.8%
2010 41.8% 28.3% 28.0% 42.3% 73.2% 22.1% 16.7%
2011 46.9% 34.6% 30.4% 45.5% 76.6% 24.5% 20.2%
2012 46.0% 34.4% 32.6% 45.7% 75.6% 26.6% 17.6%
*Derived from Dataquick chart; new and resale homes based on property records, all others MLS based.

In 2010 there were 141,722 MLS-based home sales (SF and C/TH) in Florida that were all-cash transactions, while there were 79,779 foreclosure sales and 53,780 short sales. In 2012 there were 54,607 foreclosure sales and 63,250 short sales (or 117,867 “distressed” sales, down 15,692 from 2010), but all-cash transactions increased by 28,647 to 170,369.

From 2009 to 2012 MLS-based home sales in Florida increased by 24.2%. All-cash transactions increased by 54.1%, while mortgage-financed transactions were very slightly LOWER in 2012 compared to 2009.

Read more at http://www.calculatedriskblog.com/2013/04/lawler-how-much-has-single-family.html#eoU14525vQZTblwA.99

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