Tag Archives: Housing

PragCap: Your Housing “Recovery” in Charts….

Your Housing “Recovery” in Charts….

02/20/2013

The post Your Housing “Recovery” in Charts…. appeared first on PRAGMATIC CAPITALISM.

I’ve become much more constructive about housing in the last year.  But I still don’t understand the euphoria in some circles.  For the most part, I am still in the camp that says we’re in a post-bubble “work out” period.  That means the big price declines are past us, but the upside remains modest in most markets.

That said, I still don’t see the recovery in the various housing indices that many are raving about.  To me, this looks almost exactly like what I’ve been predicting all along.  A sideways market that is consistent with past bubble experiences.  Think Nasdaq, Shanghai, Gold in the 80s, etc.  In essence, it looks like a big L.

So far, the price action in US housing doesn’t look like anything that unusual for a post-bubble environment and it looks a lot more like a post-bubble “work out” than a recovery to me.  Obviously, I am biased towards believing that my view will be right, but you tell me what the pictures show….

Charts via Orcam Financial Group:

hr1 Your Housing Recovery in Charts....

hr2 Your Housing Recovery in Charts....

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Read of the Day: Housing Conditions and the Economic Impact of Superstorm Sandy on the Region

Just Released: Press Briefing on Housing Conditions and the Economic Impact of Superstorm Sandy on the Region

Jaison R. Abel, Jason Bram, and Claire KramerAt today’s regional economic press briefing, we provided an update on housing conditions as well as an initial assessment of superstorm Sandy’s economic impact on the region.

 

        The housing sector is an important part of the overall economy, and it has played a key role in shaping the Great Recession and the recovery that has followed. While our region was largely spared the worst of the housing bust, many households—particularly in northern New Jersey and areas around New York City—continue to feel its economic consequences. Fortunately,housing conditions here have begun to show signs of steady improvement. Home prices in much of the region have gradually increased throughout the year and other measures of housing-related activity appear to have stabilized, albeit at low levels. In addition, indicators of housing-related financial stress that we monitor appear to have eased somewhat in recent months. Taken together, these trends suggest that many of our region’s housing markets have reached an important point in the recovery process. At the same time, it’s important to recognize that housing conditions in the region’s most depressed markets remain sluggish. In addition, owing in large part to the long foreclosure process in New York and New Jersey, our region faces a large and growing backlog of foreclosures. So, while there have been some encouraging signs in our region’s housing markets this year, going forward there are still some significant challenges to broadening and sustaining the recovery that’s under way.One immediate challenge is rebuilding and recovering from Sandy. Geographically, it appears that the hardest-hit areas were the coastal communities of Queens, Staten Island, Brooklyn, Long Island, Lower Manhattan, and the New Jersey shore. Physical damage to the region was primarily to homes and personal property, commercial property, and infrastructure. An immediate housing priority is the provision of shelter to those whose homes were severely damaged. As such, housing task forces have been formed to identify local housing needs, catalog vacant rental housing units, and investigate temporary housing options. On the business front, the focus has been on securing gap financing for firms to finance short-term cash flow while they restart their operations and await insurance settlements.

In assessing the impact of natural disasters like Sandy, it’s important to recognize that some activity that appears to be lost may in fact only be postponed or shifted elsewhere within the region. Moreover, a surge in economic activity typically follows a natural disaster as the region rebuilds much of the damaged or destroyed property and infrastructure, often with resources from outside the region, like FEMA assistance and private insurance. At the same time, welfare losses resulting from the pain and suffering of people who lost homes or loved ones, as well as inconveniences like extra time spent commuting, are often neglected when assessing the impact of natural disasters such as Sandy.

For more information on housing conditions and Sandy’s economic impact on the region, see the regional economic press briefing webpage.

Disclaimer
The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

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Fed’s Beige Book: Single-Family Homes Continued to Improve Across Most Districts

 

Real Estate and Construction
Overall, markets for single-family homes continued to improve across most Districts with the exception of Boston and Philadelphia. Residential real estate markets in the New York District were mixed but generally firm prior to the storm. Selling prices were steady or rising. Boston, New York, Richmond, Atlanta, Kansas City, and Dallas noted declining or tight inventories. The Cleveland District indicated that the number of single-family housing starts had increased since our last report and from a year ago; most sales contracts were in higher price-point categories. Similarly, Richmond noted more residential work in the high-end home category for the first time in three years, and builders cited significant pent-up demand in the first-time buyer segment. Atlanta indicated that existing home sales were up slightly compared to a year ago and reported that investors were more active in Florida than in the rest of the District. In Chicago, residential construction increased at a slow but steady pace in October and early November, and construction increased for single-family as well as multi-family homes. St. Louis reported that residential real estate market conditions continued to improve, and Minneapolis indicated that segments of construction and real estate were growing at a double-digit clip. Kansas City characterized residential real estate activity as brisk and noted that a solid rise in home sales had reduced home inventories. Dallas noted that single-family housing activity remained strong, with both new and existing home sales activity increasing. San Francisco reported that home demand continued to strengthen and that home sales continued to grow on a sustained basis in most areas, spurring new home construction. However, sales growth generally slowed for both the condominium and single-family home markets in the Boston District, and the Philadelphia District noted that October began as a disappointing month for some Realtors, only to be punctuated by Hurricane Sandy.

Construction and commercial real estate activity generally improved across Districts since the last report. Gains, albeit modest in most cases, were reported by Philadelphia, Richmond, Chicago, and Minneapolis. The gains among Cleveland’s contacts were tempered by reports in recent weeks of a slowdown in inquiries and a decline in public-sector projects. Kansas City described activity as holding firm and noted that real estate markets remained stronger than a year ago. Demand for office and industrial space continued to increase in Dallas, although contacts at some businesses said they were “holding back on expansions due to uncertainty.” Several Districts noted segments of little change in commercial real estate activity. Boston described market fundamentals as flat, and San Francisco depicted market conditions as stable but with pockets of strength for large infrastructure projects such as roads and bridges. Commercial and industrial conditions were mixed in the St. Louis District and throughout most of New York prior to the hurricane. New York added that, while office markets across upstate New York were unaffected by the storm, there were some signs of recent softening.

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Read of the Day: Housing Market Uptrend Expected Through 2014

ORLANDO (November 9, 2012) – The housing market recovery should continue through the coming years, assuming there are no further limitations on the availability of mortgage credit or a “fiscal cliff,” according to forecast presentations at a residential forum here at the 2012 Realtors®Conference and Expo.

Lawrence Yun , chief economist of the National Association of Realtors®, said the housing market clearly turned around in 2012. “Existing-home sales, new-home sales and housing starts are all recording notable gains this year in contrast with suppressed activity in the previous four years, and all of the major home price measures are showing sustained increases,” he said.

“Disruption from Sandy likely will be temporary, notably in New Jersey and New York, but the market is likely to pick up speed within a few months with the need to build new homes in damaged areas,” Yun added.

Yun sees no threatening signs for inflation in 2013, but projects it to be in the range of 4 to 6 percent by 2015. “The huge federal budget deficit is likely to push up borrowing costs and raise inflation well above 2 percent,” he said.

Rising rents, quantitative easing (the printing of money), federal spending outpacing revenue, and a national debt equal to roughly 10 percent of Gross Domestic Product are all raising inflationary pressures.

Mortgage interest rates are forecast to gradually rise and to average 4.0 percent next year, and 4.6 percent in 2014 from the inflationary pressure.

With rising demand and an ongoing decline in housing inventory, Yun expects meaningfully higher home prices. The national median existing-home price should rise 6.0 percent to $176,100 for all of 2012, and increase another 5.1 percent next year to $185,200; comparable gains are seen in 2014.

“Real estate will be a hedge against inflation, with values rising 15 percent cumulatively over the next three years, also meaning there will be fewer upside-down home owners,” Yun said. “Today is a perfect opportunity for moderate-income renters to become successful home owners, but stringent mortgage credit conditions are holding them back.”

Existing-home sales this year are forecast to rise 9.0 percent to 4.64 million, followed by an 8.7 percent increase to 5.05 million in 2013; a total of about 5.3 million are seen in 2014.

New-home sales are expected to increase to 368,000 this year from a record low 301,000 in 2011, and grow strongly to 575,000 in 2013. Housing starts are forecast to rise to 776,000 in 2012 from 612,000 last year, and reach 1.13 million next year.

“The growth in new construction sounds very impressive, and it does mark a genuine recovery, but it must be kept in mind that the anticipated volume remains below long-term underlying demand,” Yun said. “Unless building activity returns to normal levels in the next couple years, housing shortages could cause home prices to accelerate, and the movement of home prices will be closely tied to the level of housing starts.”

“Home sales and construction activity depend on steady job growth, which we are seeing, but thus far we’ve only regained half of the jobs lost during the recession,” Yun said.

Yun projects growth in Gross Domestic Product to be 2.1 percent this year and 2.5 percent in 2013. The unemployment rate is showing slow, steady progress and is expected to decline to about 7.6 percent around the end of 2013. “Of course these projections assume Congress will largely avoid the ‘fiscal cliff’ scenario,” Yun said. “While we’re hopeful that something can be accomplished, the alternative would be a likely recession, so automatic spending cuts and tax increases need to be addressed quickly.”

Regardless, Yun said that four years from now there will be an even greater disparity in wealth distribution. “People who purchased homes at low prices in the past couple years, including many investors, can expect healthy growth in home equity over the next four years, while renters who were unable to get into the market will be in a weaker position because they are unable to accumulate wealth,” he said. “Not only will renters miss out on the price gains, but they’ll also face rents rising at faster rates.”

Also speaking was Mark Vitner, managing director and senior economist at Wells Fargo, who said the fiscal cliff is the biggest situation that needs to be addressed. “Beyond concerns about the fiscal cliff, the economic improvement seems to be broadening,” he said.

“Housing will strengthen in 2013 even if the economy weakens because there is a demand for more construction, and the demand for apartments is rising at a faster rate than the need for more single-family homes,” Vitner said. “Unfortunately, apartment construction is focused on about 15 submarkets, so additions to supply will be uneven.

Even with declining market shares of foreclosures and short sales, Vitner said they will continue. “Distressed homes right now are like an after-Christmas sale – most of the best stuff has been picked over, but make no mistake they’ll be with us for a while.”

Yun projects the market share of distressed sales will decline from about 25 percent in 2012 to 8 percent in 2014

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Carloads of Lumber surpasses 2008 Levels

For the first time the number of Carloads of Lumber & Wood Products has surpassed 2008 levels. Rail traffic continues to be an excellent indicator of housing growth.

Rail traffic is up over 10% from last year.

Carload of Lumber surpasses 2008 Levels

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Fed’s Beige Book: Economic activity increased at “modest to moderate” pace, Residential real estate “largely positive”

Fed’s Beige Book: Economic activity increased at “modest to moderate” pace, Residential real estate “largely positive”

by Bill McBride on 7/18/2012 

Fed’s Beige Book:

Reports from most of the twelve Federal Reserve Districts indicated that overall economic activity continued to expand at a modest to moderate pace in June and early July.

This is a downgrade from the previous beige book that reported “moderate” growth.

And on real estate:

Reports on residential housing markets remained largely positive. Sales were characterized as improving in Philadelphia, New York, Richmond, Chicago, St. Louis, and Minneapolis, while home sales increased in Boston, Cleveland, Atlanta, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.

Most Districts reported declines in home inventoriesHomes prices have begun to stabilize in some markets and price increases were noted in select markets. Boston and Atlanta noted that appraisals were coming in below market prices.

Rental markets continued to strengthen by most accounts.

Recent activity in commercial real estate markets has been mixed. Modest improvements were noted in Boston, Atlanta, and St. Louis and demand strengthened in the San Francisco District. Softer conditions were reported in the New York and Richmond Districts, while demand held steady in the Philadelphia and Dallas Districts. Nonresidential construction activity varied as well.

“Prepared at the Federal Reserve Bank of Atlanta and based on information collected before July 9, 2012.”

More sluggish growth, but still “modest to moderate”. And a few positive comments on residential real estate …

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How the 2007 Housing Bust Stacks Up Historically

HOW THE 2007 HOUSING BUST STACKS UP HISTORICALLY

3 MAY 2012 BY SOBER LOOK

By Walter Kurtz, Sober Look

Goldman recently completed a thorough study on housing busts around the world and throughout history. The study covered the time period since 1890 for some dozen “developed” economies (including for example the US housing bust of the 1920s). The idea was to assemble statistics on the pre and post-bust economic trends. That in turn allowed them to gauge what was or was not typical about the US 2007 housing bust.

In general the study found that after the bust, the economy experiences the following trends:

1. The GDP growth is sluggish for a prolonged period
2. High unemployment and relatively high output gap persists
3. Double-dip recessions are not common
4. The private sector deleverages while the public sector leverage increases
5. Interest rates remain low for a long time
6. Stock returns are modest, consistent with slow GDP growth

Based on these findings, it turns out that in general the US housing bust was severe but not that unusual. The chart below shows the historical distribution of housing market corrections for all the nations and periods included in the study. The 30-35% correction in the US housing market (as scary as the experience has been) is not outside the range of other housing busts (DM refers to developed economies).

Source: GS

There are however two indicators that do stand out:

1. The US public sector leverage increase is sharper than the historical range.

Source: GS

2. As discussed before, the level of real interest rates in the US is completely outside the historical range.

Source: GS

Other indicators for the 2007 housing bust are roughly within the historical range for such events.

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