New home sales fall in October; Down 30 percent from year before

Today, the U.S. Department of Housing and Urban Development and U.S. Census Bureau released new home sales data for October 2010 showing a decrease of 8.1 percent from the month before, but a decrease of 28.5 percent from a year ago.

The seasonally-adjusted new home sales rate for October was 283,000 homes, a 8.1 percent decrease from Septbmer’s rate of 308,000 homes. The supply of new homes on the market increase from an adjusted 7.9 month supply in September to a 8.6 month supply in October. The median new home price decreased for the month to $194,900 from $226,300 the month before and down from $215,100 a year ago. Continue reading “New home sales fall in October; Down 30 percent from year before

October New Home Construction: Permits Up, Starts Down

New construction dn-3

The U.S. Census Bureau and US Department of Housing and Urban Development (HUD) issued a their report on New Residential Construction for October 2010 showing a slight increase in single-family home building permits and a small decrease in new home starts compared to the month before. Continue reading “October New Home Construction: Permits Up, Starts Down

New home sales rate up over six percent in September; down over 20 percent from year before

Dennis Norman

Today, the U.S. Department of Housing and Urban Development and U.S. Census Bureau released new home sales data for September 2010 showing an increase of 6.6 percent from the month before, but a decrease of 21.5 percent from a year ago.

Continue reading “New home sales rate up over six percent in September; down over 20 percent from year before

New home construction increases slightly in September; Still greatly outpaces sales

New construction dn-3

The U.S. Census Bureau and US Department of Housing and Urban Development (HUD) issued a their report on New Residential Construction for September 2010 showing a slight increase in single-family home building permits and an increase in new home starts compared to the month before. Continue reading “New home construction increases slightly in September; Still greatly outpaces sales

The country’s first home developer

 

Dennis Norman

I saw an interesting tidbit that came from the US Census Bureau that shows just how much things have changed in the real estate world in the past 60+ years in the U.S.  The piece I saw was from the census bureau’s “Profile America” series and discussed one of the first communities built in our country by a real estate developer back in 1947.  The place was the town of Levittown, on New York’s Long Island and aptly named for the developers, William and Alfred Levitt.

Eventually the town contained more than 17,000 Cape Code and ranch style homes that soldiers returning from World War II snapped up…..apparently there was a housing shortage at the time (oh what I wouldn’t give for another housing shortage :).   Continue reading “The country’s first home developer

No Improvement in New Home Sales in August

Dennis Norman

Last month I reported that July’s new home sales rate of 276,000 homes was the lowest rate on record.  Subsequently the Commerce Department revised July and changed the sales rate to 288,000 homes raising July to the second-lowest home sales rate on record.  Today, the numbers for August came out and they are no better….the new home sales rate for August is being reported by the Commerce Department as 288,000 homes, the same as July. Continue reading “No Improvement in New Home Sales in August

New home construction continues to outpace new home sales; look for inventory to grow

New construction dn-3

The U.S. Census Bureau and US Department of Housing and Urban Development (HUD) issued a their report on New Residential Construction for August 2010 showing a decrease in single-family home building permits and an increase in new home starts compared to the month before. Continue reading “New home construction continues to outpace new home sales; look for inventory to grow

New Home Sales In July Drop to All-Time Low

Dennis Norman

The good news is May’s new home sales rate of 267,000, which was the lowest sales rate on record, was revised upward to 281,000. The bad news is June’s sales rate of 330,000 was revised downward to 315,000 and now new home sales for July were reported at 276,000 the new lowest rate on record. Due to the dismal sales, the inventory of new homes on the market increased from an 8 month supply in June to a 9.1 month supply in July.

Continue reading “New Home Sales In July Drop to All-Time Low

New Home Permits and Construction Drop in July; Still outpacing new home sales though

New construction dn-3

The U.S. Census Bureau and US Department of Housing and Urban Development (HUD) issued a their report on New Residential Construction for July 2010 showing a decrease in single-family home building permits and a decrease in new home starts from June. Continue reading “New Home Permits and Construction Drop in July; Still outpacing new home sales though

New Home Sales Increase 23 percent to Second-Worst Rate on Record

Dennis Norman

Yes, the headline is correct….New home sales in June were up 23 percent from May, but unfortunately the revised May annual new home sales rate of 267,000 was the lowest rate of sale on record therefore even after a 23.6 percent increase it only brought June up to 330,000 new homes, a rate that is now the second lowest new home sales rate on record. June’s new home sales rate is 16.7 percent below a year ago.

There is some good news in the report; the inventory of new homes (seasonally adjusted) at the end of June is 7.6 months, a 20.8 percent decrease from May’s revised inventory of 9.5 months and is a 10.6 percent decrease from June 2009 when the inventory was 8.5 months.

My Mantra

As has been my long-running mantra, I don’t like “seasonally adjusted” numbers and “rate” of sales. Why, for one I can’t figure out how in the world they compute the numbers. Second, I just don’t think discussing New Home Sales September 2009the “rate” of new home sales paints a realistic picture of the market. I think this holds especially true when we have artificial forces affecting the housing market such as tax credits as we have seen what an artificial “bubble” in the market this can cause.

Here is the raw data, the ACTUAL new homes sold- no fluff, no “adjusting”

  • 30,000 new homes sold in June, an increase of 15.4 percent from May’s 26,000 new homes sold (revised) but is an 18.9 percent decrease from June 2009 when there were 37,000 new homes sold.
    • 53.3 percent (16,000) of the new homes sold were in the South region- an increase of 23.0 percent from May.
    • the west region had 5,000 new homes sold, a decrease of 16.7 percent from May’s revised sales.
    • the Midwest had 5,000 new homes sold, an increase of 25.0 percent from May.
    • The Northeast had 4,000 new homes sold, an increase of 33.3 percent from May.
  • YTD – In the first six months of 2010 there have been 183,000 new homes sold, a decrease of 2.7 percent from the same time last year.
  • Median sale price of new homes in the US in June was $213,400, a 1.4 percent decrease from May’s median new home price of $216,400 and 0.6 percent decrease from a year ago when the median new home price was $214,700.
  • New Homes in the US in May have been for sale for a median time of 12.4 months since the homes were completed, a 12 percent decrease from May’s revised figure of 14.1 months.

My prediction for 2010

I’m encouraged by indications of some price stability we are seeing as well as decreasing inventory of new homes. I’m concerned about the new home permits and starts as they appear to be greatly outpacing sales and could lead to increased inventories and I’m also concerned about the underlying economy and general anemic behavior of the real estate market. Clearly this market is not going to fix itself overnight, nor this year even. However, having said that, I’m going to stick with, what I think is perhaps somewhat optimistic, prediction of 336,600 – 355,000 new home sales in 2010.

New Home Building Permits and Starts Down In June

New construction dn-3

The U.S. Census Bureau and US Department of Housing and Urban Development (HUD) issued a their report on New Residential Construction for June 2010 showing a decrease in building permits and a decrease in new home starts from May.

The report shows the following:

  • Building permits issued for single-family residences in June were at an annual rate of 421,000 which is 3.4 percent below the revised May rate of 4216,000 and a decrease of 6.7 percent from a year ago when the rate was 451,000.
  • Housing starts for single-family residences in June were at an annual rate of 454,000 which is a decrease of 0.7 percent from the revised rate for May of 457,000 and an decrease of 4.6 percent from a year ago.
  • Homes completed in June were at a rate of 676,000 homes, an increase of 31.3 percent from May’s revised rate of 515,000 homes and an increase of 32.5 percent from a year ago.

As I say every month, we need to remember that all the numbers above are “seasonally adjusted” annual rates and the year over year comparisons are just comparing the numbers for June 2010 versus June 2009. Another way I like to look at where things stand is to simply look at the year to date data; actual numbers, not seasonally adjusted, compared to last years ytd numbers at this same time. I think this may give a little better comparison so those numbers are below:

  • Through June 2010 there have been 245,100 permits issued for new homes compared with 203,000 this time last year for an increase of 20.7 percent.
    • In June there were 42,900 permits issued, an increase from May’s 42,100 permits.
  • Through June 2010 there have been 256,400 new homes started compared with 202,100 this time last year for an increase of 26.9 percent.
    • In June there were 45,500 new homes started, an increase from May’s 43,300 new starts.
  • There have been 243,800 new homes completed through June 2010, pretty much the same as this time last year when there were 243,600 homes completed.
    • In June there were 60,000 new homes completed, an increase from May’s 42,600 completions.

Let’s do one of my favorite things and look at the raw numbers and not seasonally-adjusted numbers to compare construction activity to sales:

  • Through the end of May, 2010 (the most recent period sales data is available for) there have been 159,000 new homes sold and there have been 183,800 new homes completed, outpacing sales by 15.6 percent.
    • For the 12-month period June 2009 through May 2010 there were 383,000 new homes sold and there were 504,800 new homes completed, outpacing sales by 31.8 percent.
  • Through the end of May there have been 210,900 new homes started outpacing the new ytd home sales activity through May by 32.6 percent.

As expected, building permits and starts have dropped after the temporary spike upward which was the result of home-buyers rushing tobeat the tax-credit deadline of April 30th. A concern of mine however is that new home starts and permits continue to outpace new home sales in both YTD numbers as well as in the prior 12 month period as I have shown above. Replenishing inventory of new homes would make sense if the underlying real estate market was showing some solid signs of recovery and growth but unfortunately it is not so I’m afraid if this trend continues it is going to lead to an over-supply of new homes again which will not be good.

 

What’s Hot and What’s Not in New Homes?

Dennis Norman

Less Is More

Over the past decade or so it seems everything has gotten “super-sized” to the point of absurdity in my opinion. Therefore I find it refreshing to see that, according to the “Home Trends 2010” report by the Real Estate Buyer’s Agent Council, home buyers are scaling down both in size and in features.  Perhaps the past couple of years has humbled many of us and given us a different perspective on materialistic things?

Anyway, before I go off on  a tangent, here are highlights from the Home Trends report:

  • The average size of new single family homes decreased in 2009 after being flat in 2008.
  • Homes built with at least 3 bedrooms decreased in 2009 for the first-time since 1992 (I guess more and more of my fellow baby-boomers are becoming empty nesters?)
  • Homes built with 4 or more bedrooms has been falling since 2007.
  • Homes with two or more stories peaked in 2006, then began a downward trend.

The ten most likely features that builders will include in a new homes:

  • Walk-in-closet in master bedroom
  • Laundry Room
  • Insulated front door
  • Great Room
  • Low-e windows
  • Linen Closet
  • Programmable thermostat
  • Energy efficient appliances and lighting
  • Separate shower and tub in master bedroom
  • 9-foot ceilings or higher on 1st floor

New homes are no doubt being built with affordability and efficiency in mind.  Nonetheless buyers seem unwilling to give up master bedroom suites with nice master baths, although some of the “super-size” stuff is gone, such as multiple shower heads.  What else is getting cut?  According to the report, builders say that an outdoor kitchen is the first to go as well as outdoor fireplaces, sun-room, butlers pantry and a media room.

So, I wonder what is going to happen to all those “McMansions” that were built during the last decade as us baby boomers age, become empty-nesters and don’t need the space?  Hmm…not so sure the X’rs and Y’rs are going to super-size their space.

 

New-Home Sales Crash In May after Sugar-Rush of Tax Credit Sales

Dennis Norman

Last month after the new home sales reports came out I had this to say:

“I’m very encouraged by home sales in March and April, both in new homes and existing home sales and, if it wasn’t for the fact the homebuyer tax-credit incentive expired April 30th, no doubt a factor that caused buyers to rush to buy, I would feel the market was turning. However, I have strong concerns that this recent “housing recovery” is the result of an artificial market created by incentives, leading to sort of a “sugar-rush” among homebuyers, and now that the sugar is wearing off, buyers will slow down.”

Unfortunately, my concerns were warranted it appears….Today The U.S. Department of Commerce released a report showing the sale of New Homes in May were at a seasonally adjusted annual rate of 300,000, a 32.7 percent decrease from the revised April rate of 446,000 and is 18.3 percent below a year ago.

The inventory of new homes (seasonally adjusted) at the end of May is 8.5 months almost a 47 percent increase from April when there was a 5.8 month supply.

My Mantra

As has been my long-running mantra, I don’t like “seasonally adjusted” numbers and “rate” of sales. Why, for one I can’t figure out how in the world they compute the numbers. Second, I just don’t think discussing New Home Sales September 2009the “rate” of new home sales paints a realistic picture of the market. I think this holds especially true when we have artificial forces affecting the housing market such as tax credits as we have seen what an artificial “bubble” in the market this can cause.

Here is the raw data, the ACTUAL new homes sold- no fluff, no “adjusting”

  • 28,000 new homes sold in May, a decrease of 36.4 percent from April’s 44,000 new homes sold and also a 17.6 percent decrease from May 2009 when there were 34,000 new homes sold.
    • 53.5 percent (15,000) of the new homes sold were in the South region- a decrease of 34.8 percent from April.
    • the west region had 5,000 new homes sold, a decrease of 50.0 percent from April
    • the Midwest had 5,000 new homes sold, a decrease of 16.7 percent from April.
    • The Northeast had 3,000 new homes sold, a decrease of 25.0 percent from April.
  • YTD – In the first four months of 2010 there have been 159,000 new homes sold, an increase of 6.0 percent from the same time last year.
  • Median sale price of new homes in the US in May was $200,900, a 0.9 percent decrease from April’s median new home price of $202,900 and a 9.6 percent decrease from a year ago when the median new home price was $222,300.
  • New Homes in the US in May have been for sale for a median time of 14.2 months since the homes were completed, slightly less than April’s revised figure of 14.3 months.

My prediction for 2010

I think this report shows that the housing market is still quite volatile, particularly new home sales, and consumers are still quite cautious. May is normally a good month for home sales and, as this report shows, sales have languished this month. Granted, some of the buyers that would normally be buying now may have pushed up the time-line to get the credits, so this may just be a lull from that, and YTD home sales are running slightly ahead of last year, so the sales numbers for June and July are going to reveal a lot. If new home sales for those months pops back up to the 37,000 – 38,000 range like they were last time last year then that would be encouraging and a sign the new home market is stabilizing. However, if new home sales for those months stay in the 20 something thousand range like May, then I think we are in for more pain.

As far as my prediction for new home sales this year I’m going to stick with my estimate of 336,600 – 355,000 new home sales in 2010.

New Home Permits Drop Almost 10 Percent in May; New Home Starts Drop 17 Percent

New construction dn-3

The U.S. Census Bureau and US Department of Housing and Urban Development (HUD) issued a their report on New Residential Construction for May 2010 showing a decrease in building permits and a decrease in new home starts from April.

The report shows the following:

  • Building permits issued for single-family residences in May were at an annual rate of 438,000 which is 9.9 percent below the revised April rate of 486,000 and an increase of 3.1 percent from a year ago when the rate was 425,000.
  • Housing starts for single-family residences in May were at an annual rate of 468,000 which is a decrease of 17.2 percent from April’s revised rate of 565,000 and an increase of 15.3 percent from a year ago.
  • Homes completed in May were at a rate of 507,000 homes, down 7.8 percent from April’s rate of 550,000 homes and an increase of 2.4 percent from a year ago.

As I say every month, we need to remember that all the numbers above are “seasonally adjusted” annual rates and the year over year comparisons are just comparing the numbers for May 2010 versus May 2009. Another way I like to look at where things stand is to simply look at the year to date data; actual numbers, not seasonally adjusted, compared to last years ytd numbers at this same time. I think this may give a little better comparison so those numbers are below:

  • Through May 2010 there have been 202,600 permits issued for new homes compared with 156.900 this time last year for an increase of 29.1 percent.
    • In May there were 50,600 permits issued, an increase from April’s 35,000 permits.
  • Through May 2010 there have been 211,700 new homes started compared with 152,900 this time last year for an increase of 38.5 percent.
    • In May there were 45,100 new homes started, a decrease from April’s 52,300 new starts.
  • There have been 183,700 new homes completed through May 2010, compared with 199,200 this time last year for a decline of 7.8.
    • In May there were 42,400 new homes completed, a slight decrease from April’s 43,000 completions.

Let’s do one of my favorite things and look at the raw numbers and not seasonally-adjusted numbers to compare construction activity to sales:

  • Through the end of April, 2010 (the most recent period sales data is available for) there have been 137,000 new homes sold and there have been 141,300 new homes completed, outpacing sales by a modest 3.1 percent.
  • Through the end of April there have been 166,600 new homes started outpacing the new ytd home sales activity through April by 21.6 percent.

I think most people fully expected building permits and starts to drop in May after the spike in the prior couple of months as a result of the home-buyer tax credit deadline to purchase of April 30th. Since starts and permits are still outpacing home sales I still have concern that there is too much optimism out there and an expectation that demand for new homes is going to increase soon which I don’t think is in the cards. I think until the foreclosure and mortgage delinquency rates start subsiding, and the inventory of foreclosures and REO’s on the market (and on the banks books) has bled off, we won’t be seeing much of an increase in demand for new homes.

 

St Louis Area New-Home Building Permits Drop In April After Spiking in March

Dennis Norman

Dennis Norman

After seeing a spike in permits for new homes in St. Louis in March, with the exception of the City of St. Louis, all the St. Louis metro area counties saw a decline in new home permits in April, some rather steep based upon the latest data reported by the Home Builders Association of St. Louis (HBA).

Existing home sales data and mortgage application data have suggested that the April 30th deadline for the home-buyer tax credit caused an artificial surge in the housing market as buyers raced to beat the deadline to buy a home; it now appears the new home data is going to follow suit.

Highlights from the HBA report (April, 2010 New-Home Permit Data):

  • St. Louis County New Home Building Permits: 40, down 18.4 percent from March and just slightly behind April 2009.
  • St. Charles County New Home Building Permits: 140, down 31.4 percent from March and slightly ahead of April 2009.
  • Jefferson County New Home Building Permits: 59, down 33.0 percent from March but Up 20.4 percent from April 2009.
  • Franklin County New Home Building Permits: 18, down 33.33 percent from March, but up 100 percent from April 2009.
  • Lincoln County New Home Building Permits: 13, down 40.9 percent from March but up a staggering 333 percent from April 2009.
  • Warren County New Home Building Permits: 17, down 64.0 percent from March but up 112.5 percent from April 2009.
  • St. Louis City New Home Building Permits: 14, up 55.56 percent from March but down 26.32 percent from April 2009.

Year-t0-date New Home Permits Look Better For All Areas, except the City of St. Louis (all current ytd data is through April 2010):

  • St. Louis County YTD New Home Building Permits: 148, up 37.03 percent from the same time last year and down 22.51 percent from the same period in 2008.
  • St. Charles County YTD New Home Building Permits: 557, up 74.1 percent from the same time last year and up 8.2 percent from the same period in 2008.
  • Jefferson County YTD New Home Building Permits: 244, up 70.63 percent from the same time last year and down 7.5 percent from the same period in 2008.
  • Franklin County YTD New Home Building Permits: 62, up 14.8 percent from the same time last year and up 264.7 percent from the same period in 2008.
  • Lincoln County YTD New Home Building Permits: 54, up 145.5 percent from the same time last year and up 12.5 percent from the same period in 2008.
  • Warren County YTD New Home Building Permits: 79, up 216.0 percent from the same time last year and up 52.0 percent from the same period in 2008.
  • City of St. Louis YTD New Home Building Permits: 25, down  13.8 percent from the same time last year and down 46.8 percent from the same period in 2008.

The YTD numbers are getting the benefit of the spike in March so, going forward in “post tax credit times”, I think it is apparent that the momentum is going to slow which will cause the comparison to the prior two years to not look quite as positive.   I think May’s numbers will be very telling of the future.

 

New Home Buyers At Risk of Losing Fixed-Rate Mortgages Again

Dennis Norman

Earlier this month I did a post about important legislation in Missouri, specifically HB 2058, which would make badly needed changes to the Missouri Mechanic’s Lien Statute, because if it didn’t pass purchasers of new homes would face hurdles obtaining long-term fixed-rate mortgages as title companies have threatened to stop providing mechanic’s lien coverage.

On May 17th I was happy to update the post with the news that the bill had passed the House and Senate and was just awaiting the signature of Governor Nixon to become effective.

Herein the problem lies…

Word is Governor Nixon may be considering vetoing the legislation.  Why you ask?  Why would he veto this legislation that overwhelmingly passed the General Assembly, has the support of dozens of stakeholders including the Home Builders Association, Missouri Land Title Association, Title Insurance Underwriters, Missouri Bankers Association, The Mortgage Bankers Association of Realtors, National Electric Contractors Assocation- St. Louis Chapter, the Carpenters District Council of Greater St. Louis, The Eastern District Labor council and more….. From the information I have, it appears there is an organized group that is opposed to this bill; attorneys that enjoy the income they make off the currently law which is cumbersome and flawed….hmm, what would happen if the law was fixed and there were fewer legal battles?

What to do to help..

If you want to make sure that the flaws in the current mechanic’s lien law are corrected, thereby enabling title companies to continue to provide mechanic’s lien coverage to lenders, so they will continue to make loans, and all along still giving protection to contractors and suppliers to make sure they get paid, then contact Governor Nixon’s office and let his staff know you want him to sign HB 2058 into law.

The phone number for the Governor’s Office is (573)-751-3222.  If you prefer you can fax him a letter at: (573) 751-1495.

 

Tax Credit Deadline Spurs New Home Sales in April; Prices Drop

Dennis Norman

The U.S. Department of Commerce released a report showing the sale of New Homes in April were at a seasonally adjusted annual rate of 504,000, a 14.8 percent increase from the revised March  rate of 439,000 and is 47.8 percent above a year ago.
The inventory of new homes (seasonally adjusted) at the end of April is just 5.0 months a huge decline from just two months ago when it was 9.2 months.

My Mantra

As has been my long-running mantra, I don’t like “seasonally adjusted” numbers and “rate” of sales (nor does Standard & Poors, publisher of the Case/Shiller Index, now either as I wrote about). Why, for one I can’t figure out how in the world they compute the numbers. Second, I just don’t think discussing New Home Sales September 2009the “rate” of new home sales paints a realistic picture of the market. I think this holds especially true when we have artificial forces affecting the housing market such as tax credits and other incentives. This can create unseasonal bursts or declines in sales that don’t really have anything to do with the underlying fundamentals of the housing market.

Here is the raw data, the ACTUAL new homes sold- no fluff, no “adjusting”

  • 48,000 new homes sold in April, an increase of 23.1 percent from March’s 39,000 new homes sold and also a whopping 50.0 percent increase from April 2009 when there were 32,000 new homes sold.
    • 54.1 percent (26,000) of the new homes sold were in the South region- an increase of 23.8 percent from March.
    • the west region had 11,000 new homes sold, an increase of 22.2 percent from March
    • the Midwest had 7,000 new homes sold, an increase of 40.0 percent from March.
    • The Northeast had 4,000 new homes sold, an increase of 33.3 percent from March.
  • YTD – In the first four months of 2010 there have been 137,000 new homes sold, an increase of 18.1 percent from the same time last year.
  • Median sale price of new homes in the US in April was $198,400, a 9.7 percent decrease from March’s median new home price of $219,600 and a 9.5 percent decrease from a year ago when the median new home price was $219,200.
  • New Homes in the US in April have been for sale for a median time of 14.3 months since the homes were completed, slightly less than March’s revised figure of 14.5 months.

My prediction for 2010

I’m very encouraged by home sales in March and April, both in new homes and existing home sales and, if it wasn’t for the fact the homebuyer tax-credit incentive expired April 30th, no doubt a factor that caused buyers to rush to buy, I would feel the market was turning. However, I have strong concerns that this recent “housing recovery” is the result of an artificial market created by incentives, leading to sort of a “sugar-rush” among homebuyers, and now that the sugar is wearing off, buyers will slow down.

Additionally, the report yesterday about home prices dropping in first quarter (not to mention this months new home sales report showing falling prices) and today’s report about the lowest rate of home-purchase mortgage applications since 1997 tells me we are going to see lower new and existing home sales numbers in the coming months.

As far as my prediction for new home sales this year I’m going to stick with my estimate of 336,600 – 355,000 new home sales in 2010.

No More Fixed-Rate Loans On New Homes If Missouri Lawmakers Don’t Act Quickly

Dennis Norman

UPDATE – May 17, 2010 – THANKS TO MISSOURI LAWMAKERS (and the efforts of the Missouri Association of REALTORS and St. Louis Home Builders Association, readers of this post that responded, and others) THE MECHANICS LIEN LAW PASSED!  ASSUMING THE GOVERNOR SIGNS IT INTO LAW FINANCING ON NEW HOMES AS WE KNOW IT HAS BEEN PRESERVED!

This week, which is the last week of the legislative session in Jefferson City, the Missouri Senate will probably take up debate on HB 2058, which is a bill that makes needed changes to the Mechanic’s Lien Statute in Missouri and has already been passed by the House of Representatives.  At a time when we are just now seeing some relief to the “real estate recession” we don’t need another blow to the industry and homeowners, which is exactly what will happen if this legislation is not passed this week.

Without HB 2058 New Home Financing As We Know It Will Be Gone

Over the past three years or so, since the real estate bubble burst, we have had a crisis develop in Missouri with regard to Mechanic’s Liens.  Title Insurance companies have been overwhelmed by claims made as a result of contractors, sub-contractors and suppliers having not been paid for work done on new homes.  During this period flaws in the current Mechanic’s Lien statute have become apparent and need to be changed.

The Missouri Land Title Association has worked to get such changes made in an effort to encourage title insurance companies to continue to offer Mechanic’s lien coverage so borrowers may continue to obtain long-term, fixed-rate mortgages (in which lenders require mechanic’s lien coverage) on new homes.  Without such legislation title insurance underwriters have threatened to cease offering mechanic’s lien coverage on new homes.

Highlights of the bill:

  • Contractors, Sub-Contractors and suppliers would continue to have the right to file mechanic’s liens to assure they are paid for the labor, services and materials however it would require them to file a notice of rights within 60 days to preserve their lien rights.  This would give everyone (homeowners, lenders, title insurance companies, etc) adequate notice to be aware of the potential for a claim and helps identify that claim prior to the closing of the sale so the obligation can be satisfied at closing.
  • Would require a “Final, Unconditional Lien Waiver” by which a contractor, subcontractor, or supplier may release their claim to the home itself, thereby protecting the homeowner, without giving up their rights to collect money they are still owed by the builder or developer.
  • Would protect the new home purchaser from claims for unpaid work from anyone that did not record a Notice of Rights as required.  This will assure that the new home buyer does not get surprised afterward by learning they must pay money to a contractor or company they have never heard of simply because the builder didn’t pay them.

The Industry Supports the Bill:

This bill has the support of the Missouri Association of REALTORS, The Missouri Land Title Association as well as the Home Builders Association.

What You Can Do to Help:

If you would like to assure that good financing will continue to be available for new homes, and to protect the rights of the new home buyer then please call your state senator today and encourage him or her to support HB 2058, or you can simply click here and send a message to your Senator by simply filling in your name and address on the form.

 

 

New Home Sales Spike in March – Market Showing Signs of Stabilizing

Dennis Norman

The U.S. Department of Commerce released a report showing the sale of New Homes in March were at a seasonally adjusted annual rate of 411,000, a 26.9 percent increase from the revised February rate of 324,000 and is 23.8 percent above a year ago.
The inventory of new homes (seasonally adjusted) at the end of March is 6.7 months a huge decline from February’s 9.2 month supply.

My Mantra

As has been my long-running mantra, I don’t like “seasonally adjusted” numbers and “rate” of sales (nor does Standard & Poors, publisher of the Case/Shiller Index, now either as I wrote about). Why, for one I can’t figure out how in the world they compute the numbers. Second, I just don’t think discussing New Home Sales September 2009the “rate” of new home sales paints a realistic picture of the market. I think this holds especially true when we have artificial forces affecting the housing market such as tax credits and other incentives. This can create unseasonal bursts or declines in sales that don’t really have anything to do with the underlying fundamentals of the housing market.

Here is the raw data, the ACTUAL new homes sold- no fluff, no “adjusting”

  • 38,000 new homes sold in March, a jaw-dropping increase of 52.0 percent from February’s 25,000 new homes sold and also a 22.6 percent increase from March 2009 when there were 31,000 new homes sold.
    • 55.2 percent (21,000) of the new homes sold were in the South region- an increase of 75 percent from February.
    • the west region had 9,000 new homes sold, an increase of 28.5 percent from February
    • the Midwest had 4,000 new homes sold, the same as February.
    • The Northeast had 3,000 new homes sold, a 50 percent increase from February.
  • YTD – In the first three months of 2010 there have been 87,000 new homes sold, an increase of 3.6 percent from the same time last year.
  • Median sale price of new homes in the US in March was $214,000, a 2.9 percent increase from February’s median new home price of $220,500 and a 4.3 percent increase from a year ago when the median new home price was $205,100.
  • New Homes in the US in March have been for sale for a median time of 14.4 months since the homes were completed, the same as last month. This is the first month this number has not increased.

My prediction for 2010

I’ve been pretty negative on the new home market, but after seeing the big upswing in existing home sales yesterday and then these encouraging numbers for new home sales today, I’m feeling a little better. Things are definitely pointed the right direction and I feel we may be seeing a stabilizing of the housing market as well as new home supply and demand trying to find an equilibrium.

I do think however we should all have “cautious optimism” as almost half of March’s home sales were first time home buyers who could be racing to beat the April 30th deadline to buy. My guess is we will see pretty good sales numbers in April as well, then the next couple of months beyond that will tell us if the market truly has any staying power or if it was just the “sugar-rush” of the tax-credits that boosted the market.

As far as my prediction for new home sales this year I’m going to stick with my estimate of 336,600 – 355,000 new home sales in 2010.

Building Permits Jump in March; New Home Construction Still Outpacing Sales

New construction dn-3

The U.S. Census Bureau and US Department of Housing and Urban Development (HUD) issued a their report on New Residential Construction for March 2010 showing an increase in building permits and a decrease in new home starts from February.

The report shows the following:

  • Building permits issued for single-family residences in March were at an annual rate of 543,000 which is 5.6 percent above the revised February rate of 514,000 and an increase of 50.8 percent from a year ago when the rate was 360,000.
  • Housing starts for single-family residences in March were at an annual rate of 531,000 which is a decrease of 0.9 percent from February’s revised rate of 536,000 and an increase of 47.1 percent from a year ago.
  • Homes completed in March were at a rate of 486,000 homes, up 5.9 percent from February’s rate of 459,000 homes and a decrease of 11.2 percent from a year ago when the rate was 547,000 homes.

As I say every month, we need to remember that all the numbers above are “seasonally adjusted” annual rates and the year over year comparisons are just comparing the numbers for March 2010 versus March 2009. Another way I like to look at where things stand is to simply look at the year to date data; actual numbers, not seasonally adjusted, compared to last years ytd numbers at this same time. I think this may give a little better comparison so those numbers are below:

  • Through March 2010 there have been 116,400 permits issued for new homes compared with 80,100 this time last year for an increase of 45.4 percent.
    • In March there were 50,600 permits issued, an increase from February’s 35,000 permits.
  • Through March 2010 there have been 114,300 new homes started compared with 78,300 this time last year for an increase of 46.0 percent.
    • In March there were 46,900 new homes started, an increase from February’s 35,700 new starts.
  • There have been 98,600 new homes completed through March 2010, compared with 116,800 this time last year for a decline of 15.6 percent.
    • In March there were 37,600 new homes completed, an increase from February’s 31,000 completions.

Let’s do one of my favorite things and look at the raw numbers and not seasonally-adjusted numbers to compare construction activity to sales:

  • Through the end of February, 2010 there have been 46,000 new homes sold and there have been 61,000 new homes completed, outpacing sales by 32.6 percent.
  • Through the end of February there have been 67,400 new homes started outpacing the new ytd home sales activity through February by over 46.5 percent.

While I like to see the optimism from builders about the market, and have to have hope that they see market demand that maybe isn’t showing up in the numbers yet, I still have to say I think builders are being too optimistic about the housing market and are perhaps seeing a recovery and demand that is not here yet. Granted, we are going into spring, typically a good sales season, although we are also going to say goodbye to any stimulus received by the homebuyer tax credit at the end of this month. If new home sales jumps significantly over the next couple of months maybe supply and demand will come back in line. Time will tell..

Fed Reserve: Housing Sales and Starts Have Flattened Out at Depressed Levels; Foreclosures Likely To Remain High

Dennis Norman

At the Federal Open Market Committee meeting on March 16th it was suggested that “economic activity expanded at a moderate pace in early 2010″. Unfortunately, when it came to the housing market, the news was not as good and it was noted that “housing activity remained flat and the nonresidential construction section weakened further.”

The staff went on to say that activity in the housing sector appears to “have flattened out in recent months” and that “sales of both new and existing homes have turned down, while starts of single-family homes were about unchanged despite the substantial reduction in inventories of unsold new homes.” The feeling was that some of the recent weakness in home sales may have been due to buyers that rushed to buy in anticipation of the first-time homebuyer tax credit that was originally expected to expire in November, 2009.
Other concerns about the housing market that were expressed by participants in the meeting included the concern that activity appeared to be leveling off in most regions despite various forms of government support, and that the commercial and industrial real estate markets “continue to weaken”. The fact that “housing sales and starts had flattened out at depressed levels” suggests that the previous improvements in the housing market may have largely been a result of the homebuyer tax credit “rather than a fundamental strenthening of housing activity.
On another negative note for the housing markets, the meeting participants indicated that “the pace of foreclosures was likely to remain quite high; indeed, recent data on the incidence of seriously delinquent mortgages pointed to the possibility that the foreclosure rate could move higher over coming quarters.” Adding; “the prospect of further additions to the already very large inventory of vacant homes posed downside risks to home prices.” (hmm…sounds familiar, what real estate blogger has been talking about this for a while and expressing concern? oh yeah, me :)
The committee also confirmed, as I have discussed was coming in other posts, that the Fed was going to complete their purchase of the $1.25 trillion worth of mortgage-backed securities by the end of March that they committed to in an effort to add liquidity to the mortgage market and would discontinue purchasing the securities after that. Thus far this has not had much effect on interest rates but I think it will take a month or so to see where things shake out.
So, in a nutshell, the Fed doesn’t think the housing market is out of the woods yet; the government stimulus may have done nothing more than creaate a temporary “false market” (I’ve talked about this point here before too) and that the housing sector may continue to be a drag on the economy for a while.

New Home Sales Drop in February

Dennis Norman

The U.S. Department of Commerce released a report showing the sale of New Homes in February were at a seasonally adjusted annual rate of 308,000, a 2.2 percent decrease from the revised January rate of 315,000 and is 13.0 percent below a year ago.
The inventory of new homes (seasonally adjsuted) at the end of February is 9.2 months a slight increase from January’s inventory of 9.1 months.

My Mantra

As has been my long-running mantra, I don’t like “seasonally adjusted” numbers and “rate” of sales. Why, for one I can’t figure out how in the world they compute the numbers. Second, I just don’t think discussing New Home Sales September 2009the “rate” of new home sales paints a realistic picture of the market. I think this holds especially true when we have artificial forces affecting the housing market such as tax credits and other incentives. This can create unseasonal bursts or declines in sales that don’t really have anything to do with the underlying fundamentals of the housing market.

Here is the raw data, the ACTUAL new homes sold- no fluff, no “adjusting”

  • 24,000 new homes sold in February, a 9.0 percent increase from January”s 22,000 new homes sold and also a 17.2 percent decrease from February 2009 when there were 29,000 new homes sold.
    • 45.8 percent (11,000) of the new homes sold were in the South region- the same number of homes sold in January in the South
    • the west region had 8,000 new homes sold, an increase of 33 percent from February
    • the Midwest had 3,000 new homes sold, the same as the prior two months.
    • The Northeast had 2,000 new homes sold, a the same as last month.
  • YTD – In the first two months of 2010 there have been 46,000 new homes sold, a decrease of 13.2 percent from the same time last year.
  • Median sale price of new homes in the US in January was $220,500, an 8.3 percent increase from February’s median new home price of $203,500.
  • New Homes in the US in January have been for sale for a median time of 14.4 months since the homes were completed; this number has been increasing every month.

My prediction for 2010

I hate to be so negative, but I just don’t like what I’m seeing in the new home market. Near record low interest rates, home buyer tax credits as well as beaten down prices just has not had much of a positive effect on new home sales. We are at record low numbers for new home sales and there doesn’t seem to be anything that is going to change this dramatically anytime in the near future.

In addition, I am concerned we may have a second “mini-bubble” coming. I say this because, as I wrote a few days ago, new home construction, even though at greatly reduced numbers from it’s peak, is still significantly out pacing new home sales. In February new home construction starts were at a seasonally adjusted rate of 499,000 home; 62 percent higher than the seasonally adjusted new home sales rate for the same period. Looking at just raw data (not seasonally adjusted) there have been 65,100 new homes started in the first two months of this year; 42.4 percent more than the 46,000 new homes that were sold in the same period. If this trend continues new home inventory is going to continue to grow and, if sales don’t increase significantly, we may very well find ourselves back where we started soon.

As far as my prediction for new home sales this year I’m going to stick with my estimate of 336,600 – 355,000 new home sales in 2010.

Housing Recovery ‘Setback’ According to Fannie Mae Report

Dennis Norman

According to the Economics and Mortgage Market Analysis report just published by Fannie Mae, the weather was the culprit for the slow-down in home sales at the beginning of this year however, we did not get the boost they were anticipating from the extension of the tax credits. “Unfortunately, despite the high hopes associated with the extended and expanded homebuyer tax credit, housing activity appears to have faced a setback that went beyond the impact of adverse weather conditions. ” On a somewhat positive note, the analysts state they view the housing setback “to be a temporary one, and continue to expect activity to rebound later in the year but at a lower trajectory than previously projected.”

The report did not have much in the form of good news concerning new home sales and construction, citing:

  • Residential construction spending increased in January, however, “the gain was entirely due to expenditures on home improvement.”
  • Spending on new construction fell despite a modest increase in units of housing starts during the month, as the average cost per unit declined sharply.
  • Homebuilding activity has improved substantially from its depressed level a year ago, with single-family starts reaching 33 percent above their level in January 2009. A leading indicator of starts pointed to continued increase in the near term, as single-family permits rose for the third consecutive month.
  • Both new and existing home sales dropped sharply in January. New home sales fell for the third consecutive month in January to a level that surpassed the previous low recorded a year ago. A string of declines in new home sales caused the months’ supply to increase in each of the past three months, reaching the highest level since May 2009. Existing home sales have fared better. Despite two consecutive sharp drops, January sales remained nearly 12 percent above their record low.

Looking forward, here is what the Fannie Mae analysts are predicting:

  • Home sales will likely fall further in February, suggested by a sharp decline in the pending home sales index in January. Furthermore, mortgage applications to purchase homes have remained near their lowest level since 1997, according to the four-week moving average of the Purchase Index in the Mortgage Bankers Association Weekly Applications Survey.
  • Weak housing demand bodes poorly for the housing starts outlook. As a result, we revised downward our projected housing starts for the first half of this year.
  • We continue to expect home sales to rebound in the second quarter, as homebuyers rush to close sales before the expiration of the second tax credit in June.
  • In the third quarter, we expect a payback as the tax credit will likely pull some of the demand forward. By the end of the year, if the labor market improves as expected, sales should start to trend up on a sustainable basis.
  • For all of 2010, we project a nine percent increase in total home sales, compared with an increase of 12 percent in the previous forecast. Home price declines moderated in 2009 and we expect the trend to continue this year.

One of the keys to the forecast is “if the labor market improves”……another big variable is going to be interest rates. They still remain at near historic lows, and the fed’s keep telling us that the risk of inflation is low but I’m a little skeptical about rates and are concerned we may be seeing higher mortgage rates by year end. If unemployment improves significantly and if rates hold reasonably steady hopefully we will see the recovery that is being forecasted. Couple of BIG IF’s in my humble opinion though….

New Home Construction In February Continuing to Outpace New Home Sales

New construction dn-3

The U.S. Census Bureau and US Department of Housing and Urban Development (HUD) issued a their report on New Residential Construction for February 2010 showing a decrease in new home construction activity from February, but siginificant increases from a year ago..

The report shows the following:

  • Building permits issued for single-family residences in February were at an annual rate of 503,000 which is 0.2 percent below the revised January rate of 504,000 and an increase of 32.0 percent from a year ago when the rate was 381,000.
    • Dragging down the overall permit numbers for housing are multi-family dwellings with 5 or more units. Permits for those buildings were down 10.1 percent in February from January and down 41.4 percent from a year ago.
  • Housing starts for single-family residences in February were at an annual rate of 499,000 which is a decrease of 0.6 percent from January’s rate of 502,000 and an increase of 39.8 percent from a year ago.
    • Once again, bringing down the overal start numbers for housing was multi-family dwellings with 5 or more units. Starts for those buildings were down 43.1 percent in February from January and down a whopping 71.6 percent from a year ago.
  • Homes completed in February was at a rate of 458,000 homes, up 4.3 percent from January’s rate of 439,000 homes and a decrease of 14.2 percent from a year ago when the rate was 534,000 homes.
    • Interesting enough, multi-family dwellings with 5 or more units in February increased 14.6 percent from January and was down just 15.7 percent from a year ago.

As I say every month, we need to remember that all the numbers above are “seasonally adjusted” annual rates and the year over year comparisons are just comparing the numbers for February 2010 versus February 2009. Another way I like to look at where things stand is to simply look at the year to date data; actual numbers, not seasonally adjusted, compared to last years ytd numbers at this same time. I think this may give a little better comparison so those numbers are below:

  • Through February 2010 there have been 65,100 permits issued for new homes compared with 47,900 this time last year for an increase of 35.7 percent.
    • In February there were 34,300 permits issued, an increase from January’s 30,800 permits.
  • Through February 2010 there have been 65,100 new homes started compared with 47,300 this time last year for an increase of 37.6 percent.
    • In February there were 33,500 new homes started, an increase from January’s 31,600 new starts.
  • There have been 60,200 new homes completed through February 2010, compared with 75,500 this time last year for a decline of 20.2 percent.
    • In February there were 30,500 new homes completed, an increase from January’s 29,700 completions.

Let’s do one of my favorite things and look at the raw numbers and not seasonally-adjusted numbers to compare construction activity to sales:

Through the end of January, 2010 there have been 21,000 homes sold and there have been 29,700 new homes completed, outpacing sales by 41.4 percent. At the end of January there were 234,000 new homes for sale, a 9.1 month supply based upon the January seasonally adjusted sales rate, but a supply of over 11 months based upon current actual new home sales.

In January there were 31,600 new homes started outpacing the new home sales activity for January by over 50 percent.

So what does all this say about the new home market? I think it says that builders are being too optimistic about the housing market and are perhaps seeing a recovery and demand that is not here yet. The pace of new home construction activity at all stages (permits, starts, completions) has increased significantly from a year ago (in all case at least a third) but yet there are fewer new homes being sold than last year and the supply of new homes is increasing. I’m afraid this is the beginning of the next blow to the new home market.

St Louis Real Estate – New Home Sales Fall again in December

Dennis Norman

The U.S. Department of Commerce released a report showing the sale of New Homes in December were at a seasonally adjusted annual rate of 342,000, a 7.6 percent decrease from the revised November rate of 370,000 and is 8.6 percent below a year ago.

My Mantra

As has been my long-running mantra, I don’t like “seasonally adjusted” numbers and “rate” of sales. Why, for one I can’t figure out how in the world they compute the numbers. Second, I just don’t think discussing New Home Sales September 2009the “rate” of new home sales paints a realistic picture of the market. I think this holds especially true when we have artificial forces affecting the housing market such as tax credits and other incentives. This can create unseasonal bursts or declines in sales that don’t really have anything to do with the underlying fundamentals of the housing market.

Effect of tax credits on homebuyers like kid’s “sugar-rush”?

Here is the raw data, the ACTUAL new homes sold- no fluff, no “adjusting”

  • 23,000 new homes sold in December, an 11.5 percent decrease from November’s 26,000 new homes sold and also a 11.5 percent decrease from December 2008 when there were 26,000 new homes sold
    • 52 percent (12,000) of the new homes sold were in the South region- a decrease of 14.2 percent from November’s 14,000 new homes sold
    • the west region had 5,000 new homes sold the same as the month before.
    • the Midwest had 3,000 new homes sold, a 40 percent decrease from November’s sales of 5,000 homes.
    • The Northeast was the only region with an increase in sales. Decmebers sales of 3,000 homes was a 50 percent increase from November’s 2,000 new homes sold.
  • 374,000 new homes sold in 2009 which is a 22.9 percent decrease from 2008 when there were 485,000 new homes sold.
    • All four regions saw fewer home sales in 2009 than 2008.
      • Midwest decrease of 22.9 percent
      • South decrease of 24.` percent
      • West decrease of 23.7 percent
      • Northeast decrease of 11.4 percent
  • Median sale price of new homes in the US in December was $221,300.
  • For the new homes sold in the US in December the median time they have been on the market for sale is 13.9 months.
  • Inventory of new home in US at end of December is 234,000 which translates into a 10.2 month supply.

So how accurate was my predicion for 2009?

For some time I have been predicting new home sales for 2009 would end up around 385,000 – 395,000…In November I pinned the number down at 390,000…I was feeling somewhat optimistic because of the tax credits. It looks like I was a little too optimistic and was off by 16,000 homes or 4.2 percent….I guess not too bad for an amateur…

My prediction for 2010

With everything going on in our economy, elections this year, etc, it is really hard to predict what will happen in the new home market. Having said that, I will say that I don’t see 2010 being worse than 2009, unless interest rates increase significantly during the year or unemployment does not improve. Abset those two events I am going to predict that 2010 will be just slightly better than 2009 and come in at 380,000 – 400,000 homes sold.

What does 2010 hold in store for the Housing Market?

Dennis Norman

In a just a few days we will say goodbye to 2009; a year that has been brutal to the housing market. So as the new year comes in, what will 2010 hold in store for the housing market?

To answer this question I turned to the housing forecast just released by Fannie Mae to see what their economists were predicting. Here are the highlights from the report, showing actual numbers for the 3rd quarter of this year as well as Fannie Mae’s projection for 4th quarter of this year as well as 4th quarter of 2010:

  • New Home Starts (seasonally adjusted annual rate)
    • 3rd quarter actual- 499,000
    • 4th quarter 09 projection – 502,000 (+0.06 % from 3rd quarter)
    • 4th quarter 10 projection – 650,000 ( +29.4% from the year before)
  • New Home Sales (seasonally adjusted annual rate)
    • 3rd quarter actual- 413,000
    • 4th quarter 09 projection – 442,000 (+7.02 % from 3rd quarter)
    • 4th quarter 10 projection – 510,000 ( +15.38% from the year before)
  • Existing Home Sales (seasonally adjusted annual rate)
    • 3rd quarter actual- 5,290,000
    • 4th quarter 09 projection – 5,623,000 (+6.29 % from 3rd quarter)
    • 4th quarter 10 projection – 5,492,000 ( -2.32% from the year before)
  • Median Home Prices-New Homes
    • 3rd quarter actual- $210,400
    • 4th quarter 09 projection – $214,600 (+2.0 % from 3rd quarter)
    • 4th quarter 10 projection – $211,400 (-1.5% from the year before)
  • Median Home Prices-Existing Homes
    • 3rd quarter actual- $178,300
    • 4th quarter 09 projection – $175,200 (-1.73 % from 3rd quarter)
    • 4th quarter 10 projection – $172,600 (-1.48% from the year before)
  • Mortgage Interest Rates (fixed-rate mortgage)
    • 3rd quarter actual- 5.16 percent
    • 4th quarter 09 projection – 4.88 percent
    • 4th quarter 10 projection – 5.32 percent

So there you have it. A somewhat encouraging forecast for the housing industry for next year. A prediction of increased new home sales, a little bump in existing home sales at the end of this year (from the homebuyer tax credit no doubt) and then a slight drop in sales next year from that rate, a slight drop in home prices in the next year and interest rates that are still attractive. If all this pans out 2010 will no doubt end up being a kinder year to the housing industry than 2009 was.

Ah, but wait…I know what you’re thinking…same thing as me. What do these guys know? After all wasn’t it Fannie Mae that had accounting issues, management problems and has been blamed by some to be a contributor to the housing bust? Well, lets take a look at their housing forecast from a year ago and how accurate their projections were then. For the sake of this comparison we will compare their forecast for the 3rd quarter of 2009 with the actual numbers from above:

  • New Home Starts (seasonally adjusted annual rate)
  • 3rd quarter 2009 actual- 499,000
  • 3rd quarter forecast – 526,000 (over by 5.41%)
  • New Home Sales (seasonally adjusted annual rate)
  • 3rd quarter2009 actual- 413,000
  • 3rd quarter forecast – 472,000 (over by 14.29%)
  • Existing Home Sales (seasonally adjusted annual rate)
  • 3rd quarter 2009 actual- 5,290,000
  • 3rd quarter forecast – 5,003,000 (under by 5.42%)
  • Median Home Prices-New Homes
  • 3rd quarter 2009 actual- $210,400
  • 3rd quarter forecast – $208,600 (under by 0.85%)
  • Median Home Prices-Existing Homes
  • 3rd quarter 2009 actual- $178,300
  • 3rd quarter forecast – $186,600 (over by 4.66%)
  • Mortgage Interest Rates (fixed-rate mortgage)
  • 3rd quarter 2009 actual- 5.16 percent
  • 3rd quarter forecast – 5.44 percent (over by 5.42%)
  • Considering all the factors that affect the housing market I actually think Fannie Mae did pretty good in their forecast last year. They overshot new home sales a fair amount but undershot existing home sales by a much smaller percentage. Overall on combined home sales they got within 4% of predicting the number of sales. I also think they did pretty good on median home prices.

    So, since Fannie Mae’s projections last year were fairly accurate lets hope the current projections will prove to be as well. If so, then it will be clear that the worst is behind us.

    New home sales take a dive in November

    Dennis Norman

     

    Dennis Norman

    New homes were started in November at an annual rate of 482,000 homes and I asked why in my post last week since new home construction was already outpacing sales….well, today the gap got worse..

    This morning the U.S. Department of Commerce released a report showing the sale of New Homes in November were at a seasonally adjusted annual rate of 355,000, an 11.3 percent decrease from the revised October rate of 400,000 and is 9.0 percent below a year ago.

    My Mantra

    As has been my long-running mantra, I don’t like “seasonally adjusted” numbers and “rate” of sales. Why, for one I can’t figure out how in the world they compute the numbers. Second, I just don’t think discussing New Home Sales September 2009the “rate” of new home sales paints a realistic picture of the market. I think this holds especially true when we have artificial forces affecting the housing market such as tax credits and other incentives. This can create unseasonal bursts or declines in sales that don’t really have anything to do with the underlying fundamentals of the housing market.

    Effect of tax credits on homebuyers like kid’s “sugar-rush”?

    Last month I described the effect of the homebuyer tax credits on the market like a kid’s sugar rush and said “come December we may very well see new home sales slow significantly and lose the momentum that was a result of the “sugar rush affect” on homebuyers of the tax credits that gave them that quick surge of energy and motivation to buy, but then quickly wore off as the urgency subsided with the extension of the credits.” Well, December is here and look what happened to new home sales. Kind of makes it appear I’m “in the know”, huh? Nah, just lucky and also predicting something that appeared to be obvious.

    Here is the raw data, the ACTUAL new homes sold- no fluff, no “adjusting”

    • 25,000 new homes sold in November, a 24.2 percent decrease from October’s 33,000 new homes sold and a 7.4 percent decrease from November 2008 when there were 27,000 new homes sold
      • 48 percent (15,000) of the new homes sold were in the South region- an decrease of 25.0 percent from October’s 20,000 new homes sold
      • the west region had 5,000 new homes sold, a decrease of 28.5 percent from October’s 7,000 homes sold
      • the Midwest held steady with 5,000 new homes sold, the same as October.
      • The Northeast had 2,000 new homes sold, a decrease of 33.3 percent from October’s 3,000 new homes sold.
    • 349,000 new homes sold this year through the end of November which is a 23.9 percent decrease from this time last year when there were 459,000 new homes sold.
      • on YTD new home sales all four regions of the US have seen a decrease from the year before
        • Midwest decrease of 23.2 percent
        • South decrease of 25.0 percent
        • West decrease of 24.5 percent
        • Northeast decrease of 15.2 percent
    • Median sale price of new homes in the US in November was $217,400, an increase of 2.4 percent from October’s median price of $212,200.
    • For the new homes sold in the US in October the median time they have been on the market for sale is 13.6 months.
    • Inventory of new home in US at end of October is 234,000 a 2.0 percent decrease from October’s inventory of 239,000 – this is very good news…

    My prediction

    For some time I have been predicting new home sales for 2009 would end up around 385,000 – 395,000…last month I pinned the number down at 390,000…I was feeling somewhat optimistic because of the tax credits but now I can see the numbers are probably going to fall short of my prediction. If you have been reading any of my posts for a while it’s kind of hard to believe I was overly optimistic, isn’t it?

    Merry Christmas

    New home construction in the U.S. increases in November….but why?

    New construction dn-3

    New home construction is on the rise in November…. WHY??? They aren’t selling as fast as they are being built…didn’t we learn our lesson?

    The U.S. Census Bureau and US Department of Housing and Urban Development (HUD) issued a their report on New Residential Construction for November 2009 showing an increase in new home construction activity from October.

    The report shows the following:

    • Building permits issued for single-family residences in November were at an annual rate of 473,000 which is 5.3 percent above the revised October rate of 449,000 and down 12.1 percent from a year ago.
      • For the third consecutive month the Northeast region had the best numbers of the regions with an increase in permits of 6.4 percent from the prior month, and an increase of the same amount from a year ago. The other three regions also saw an increase in building activity in November from October, the south was up 6.0 percent, the west 5.3 percent and the midwest 2.7 percent. The largest increase from a year ago was the West at 16.3 percent, then the South at 15.3 percent and the Midwest at 1.4 percent.
    • Housing starts for single-family residences in November were at an annual rate of 482,000 which is 2.1 percent above the revised October rate of 472,000 and 5.5 percent above a year ago.
      • The west and south regions had increases in building starts from October at 5.4 percent and 4.4 percent respectively. The midwest and northeast both had decreases in building starts from October at 6.2 percent and 2.1 percent respectively. The midwest is the only region that has a decrease in housing starts from a year ago (13.6 percent) the south had an increase of 12.9 percent, the northeast and increase of 12.2 percent and the west an increase of 2.1 percent from a year prior.
    • Single-family homes completed in November were at a rate of 524,000, even with the revised rate for October of 524,000.
      • The midwest saw a 13.0 percent increase in completions followed by the west region with a 2.3 percent increase. The south and northeast saw declines of 0.8 percent and 18.3 percent respectively. All regions are down significantly in completions from a year ago. The south is down 35.3 percent, the midwest down 28.7 percent and the northeast and west are both down 25.8 percent.

    Something to remember is all the numbers above are “seasonally adjusted” annual rates and the year over year comparisons are just comparing the numbers for November 2009 versus November 2008. Another way I like to look at where things stand is to simply look at the year to date data; actual numbers, not seasonally adjusted, compared to last years ytd numbers at this same time. I think this may give a little better comparison so those numbers are below:

    • Through November 2009 there have been 401,000 permits issued for new homes compared with 545,000 this time last year for a decline of 26.4 percent (October YTD numbers were down 29.0 percent).
    • Through November 2009 there have been 414,400 new homes started compared with 595,900 this time last year for a decline of 30.5 percent (October YTD numbers were down 32.5 percent).
    • There have been 467,900 new homes completed through November 2009, compared with 752,500 this time last year for a decline of 37.8 percent (October YTD numbers were down 38.5 percent)

    OK, last month I said it was good to see new home permits and sales drop as I don’t think we need to increase inventory yet. Obviously no one listened to me and everything was up this month. Granted, these “up” numbers are seasonally-adjusted rates, and you know how I feel about that, but they are up none the less.

    The problem is, new home permits, starts and completions are still outpacing new home sales even when we use all the seasonally-adjusted annual rates. The new home “seasonally-adjusted” sales rate in October was 430,000 homes….however, as I have reported here, new home permits, starts and completions are still out-pacing sales, and by a pretty signifcant margin.

    Let’s do one of my favorite things and look at the raw numbers and not seasonally-adjusted numbers to compare construction activity to sales:

    Through the end of October there have been 328,000 homes sold and there have been 467,900 new homes completed, outpacing sales by 42.6 percent. At the end of October there were 240,000 new homes for sale, a 6.7 month supply based upon the October seasonally adjusted sales rate. October added 68,800 completed new homes to inventory and it is very unlikely (I’ll even say impossible) that we will see that many sales in November so we are going to see inventory increase. This is the same statement I made last month when there were 49,000 new homes completed…I ended up being right, there were only 35,000 new homes sold in October (btw, my projections called for 32,000 new homes sold…not bad for an amateur).

    I do realize that once we truly get into a recovery of the housing market we will, at some point, need to see the rate of new home construction increase to meet demand but I don’t think the time is now. I also feel the recovery is going to be VERY gradual when it comes and we are not going to see a big, and rapid spike, in sales necessitating the same in home starts, but instead a slow, gradual increase in sales which will sustain a slow, gradual increase in new home construction.

    New home building permits in St. Louis down 10 percent from a year ago; Multi-family permits down 54 percent

    Dennis Norman

    Dennis Norman

    Not surprisingly, builders in St. Louis (those that have managed to survive thus far) are not racing out to build homes.  According to the latest data reported by the Home Builders Association of St. Louis, there were 228 permits issued in October for new homes in the St. Louis metro area (St. Louis City and the Counties of St. Louis, Jefferson, St. Charles, Franklin, Lincoln and Warren) down almost 19 percent from September when there were 281 permits issued. 

    Year-to-date, through October 31, 2009, there have been 2,321 permits issued for new homes in the St. Louis metro area, down almost 10 percent from the same time in 2008 and down a whopping 51 percent from the same time in 2007 when 4,753 permits had been issued ytd.  Below are the numbers broken down by county:

    Date source: Home Builders Association of St Louis

    Date source: Home Builders Association of St Louis

    The numbers are worse for building permits for multi-family buidlings with only 36 permits for multi-family dwellings being issued in October, which is actually a 125 percent increase from September when there were only 16 permits isued, however it only puts the St. Louis metro area at 309 permits year-to-date which is down 53.8 percent from the same time last year and down 63.2 percent from the same time in 2007.

    Below are the numbers broken down by county:
    Date source: Home Builders Association of St. Louis

    Date source: Home Builders Association of St. Louis

    New Home Sales in US through October; UP 5.1 percent OR DOWN 24.1 percent from a year ago, take your pick

    Dennis Norman

    Dennis Norman

    This morning the U.S. Department of Commerce released a report showing the sale of New Homes in October were at a seasonally adjusted annual rate of 430,000, a 6.2 percent increase from the revised September rate of 405,000 and is 5.1 percent above a year ago.

    My Mantra

    As has been my long-running mantra, I don’t like “seasonally adjusted” numbers and “rate” of sales. Why, for one I can’t figure out how in the world they compute the numbers. Second, I just don’t think discussing New Home Sales September 2009the “rate” of new home sales paints a realistic picture of the market. For example, in September there were 31,000 homes sold and the original “seasonally adjusted annual rate” of sales was given as 402,000 homes. In October there were 35,000 new homes sold and this 4,000 home increase over September boosted the Continue reading “New Home Sales in US through October; UP 5.1 percent OR DOWN 24.1 percent from a year ago, take your pick