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Slowing but Still Improved: New-Home Sales Decline in June

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Sales of newly built, single-family homes slowed 8.4 percent to a seasonally adjusted annual rate of 350,000 units in June following an upwardly revised, strong pace in the previous month, according to figures released today by HUD and the U.S. Census Bureau.

“While we would have liked to see a third consecutive month of new-home sales gains in June, the fact remains that the sales numbers are up on both a quarterly and yearly basis, while builders continue to report that they are seeing more serious buyers in the market for a newly constructed home with all of the latest updates,” says Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla.

“The lower number of new-home sales in June represents an adjustment from a robust level of activity in May, yet overall results for the second quarter show we are still on track for continued improvement,” observed NAHB Chief Economist David Crowe. “That said, the very tight inventory of new homes for sale at this time poses a challenge to builders, who’d like to have a larger selection for buyers to choose from but continue to confront issues with obtaining credit to build viable new projects.”

On a regional basis, new-home sales gained 14.6 percent in the Midwest and 2.1 percent in the West, but fell 8.6 percent in the South and 60 percent in the Northeast in June. Meanwhile, the inventory of new homes for sale was virtually unchanged for the month at 144,000 units, which represents a relatively slim, 4.9-month supply at the current sales pace.

For more information, visit www.Nahb.org.

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March Pending Home Sales Rise, Market Recovering

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March Pending Home Sales Rise, Market Recovering
Pending home sales increased in March and are well above a year ago, another signal the housing market is recovering, according to the National Association of REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 4.1 percent to 101.4 in March from an upwardly revised 97.4 in February and is 12.8 percent above March 2011 when it was 89.9. The data reflects contracts but not closings.

The index is now at the highest level since April 2010 when it reached 111.3.

Lawrence Yun, NAR chief economist, said 2012 is expected to be a year of recovery for housing. “First quarter sales closings were the highest first quarter sales in five years. The latest contract signing activity suggests the second quarter will be equally good,” he says.

“The housing market has clearly turned the corner. Rising sales are bringing down inventory and creating much more balanced conditions around the county, which means home prices will be rising in more areas as the year progresses,” Yun says.

The PHSI in the Northeast slipped 0.8 percent to 78.2 in March but is 21.1 percent above March 2011. In the Midwest the index declined 0.9 percent to 93.3 but is 16.9 percent higher than a year ago. Pending home sales in the South rose 5.9 percent to an index of 114.1 in March and are 10.6 percent above March 2011. In the West the index increased 8.7 percent in March to 108.0 and is 9.0 percent above a year ago.

The National Association of REALTORS®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

*The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales; it coincides with a level that is historically healthy.

NOTE: Existing-home sales for April will be reported May 22, the next Pending Home Sales Index will be released May 30 and first quarter metro area home prices will be released May 9; release times are 10:00 a.m. EDT.

For more information, visit www.realtor.org.

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U.S. Housing Market Finally Reaches a Turning Point

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U.S. Housing Market Finally Reaches a Turning Point
Home valuations will start to climb again while adjacent consumer industries will capture significant new growth opportunities in 2012 and beyond as the U.S. housing market finally turns the corner, concludes a major new study released today by The Demand Institute. According to the study, the recovery of the housing market will have far-reaching impacts in the coming years across the United States and international markets as U.S. consumers increase their spending on buying, renovating, furnishing and maintaining their homes.

Launched in February 2012 and jointly operated by The Conference Board and Nielsen, The Demand Institute is a non-profit, non-advocacy organization with a mission to illuminate where consumer demand is headed around the world.

The new report, “The Shifting Nature of U.S. Housing Demand,” predicts that average home prices will increase by up to 1 percent in the second half of 2012. By 2014, home prices will increase by as much as 2.5 percent. From 2015 to 2017, the study projects annual increases between 3 and 4 percent. This recovery will not be uniform across the country, and the strongest markets could capture average gains of 5 percent or more in the coming years.

Between 2006 and 2011, some $7 trillion in American wealth was wiped out when home prices dropped 30 percent after dramatic climb in valuations during the housing bubble. Looking forward, the moderate growth expectations for coming years suggest a return to normalcy. As home prices continue to drop and interest rates fall further, first-time buyers and others who remained relatively cautious will be drawn back into the housing market. And, as the market recovers, so too will consumer spending.

In addition to the projected gains in home prices, the report discusses in detail the dynamics at work in the U.S. housing market and the impacts across industries. Here are further highlights from the report:

  • Rental demand will help to clear the huge oversupply of existing homes for sale. In 2011, some 14 percent of all housing units were vacant, while almost 13 percent of mortgages were in foreclosure or delinquent—increases of 12 and 129 percent respectively over 2005 levels. It will take two to three years for this oversupply to be cleared, and at that point homeownership rates will rise and return to historical levels.
  • The housing market recovery will not be uniform across the country. Some states will see annual price gains of 5 percent or more. Others will not recover for many years. The deciding factors will include the level of foreclosed inventory and rates of unemployment.
  • The average size of the American home will shrink. Many baby boomers who delayed retirement for financial reasons during the recession will downsize. They will not be alone. The majority of Americans have seen little or no wage increase for several years, and many will scale back their housing aspirations. The size of an average new home is expected to continue to fall, reaching mid-1990s levels by 2015.
  • Consumer industries including financial services, home furnishings, home remodeling will all experience shifts in demand and new growth opportunities. Part of this spending is linked to increases in wealth from improving home valuations, while an even bigger part is tied to the “transaction” of buying or selling the home which sets in motion increased demand for a wide range of products and services.
  • Despite the number of Americans who have been hurt financially by the housing crash, the desire to own a home remains strong. We do not expect to see a long-term drop in ownership rates. Indeed, one survey has revealed that more than 80 percent of Americans recently thought buying a home remained the best long-term investment they could make.
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Real Estate Market Stabilizing This Year

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Markets Seen Stabilizing This Year
Home prices this year cease their decline and gain 0.2 percent across all markets as more and more individual markets stabilize in the months to come.

However, though national prices will be flat, some 40 percent of the top 50 markets it tracks will stabilize in 2012, forecasts Clear Capital, a provider of data and solutions for real estate asset valuation and risk assessment for large financial services companies.

Clear Capital recently reported a 2.1 percent year-over-year decrease in 2011 that was bolstered by a stabilizing of prices in the latter half of the year and decreasing REO saturation.

“Overall, 2011 was a relatively quiet year for U.S. home prices compared to the last five years,” says Dr. Alex Villacorta, Director of Research and Analytics at Clear Capital. “With national prices down a little more than two percent for the year and sitting at their lowest point since 2001, our projections show that the current balance the market has found will continue through 2012.

“However, individual markets reacting to their local economic drivers exhibit a wide range of performance levels,” adds Dr. Villacorta. “Although the national numbers suggest markets are flat, when looking at individual metro markets it turns out only 24 percent of them showed signs of stabilization in 2011, while the others are still moving more dramatically higher or lower. What’s most interesting is that the lower segments of appreciating markets are driving much of the current price growth. In places like Florida, which have historically been hard hit, we are now seeing considerable activity in lower-end properties as demand continues to heat up.”

U.S. prices declined -0.4 percent in December on a quarter-over-quarter basis, showing the markets giving back some of the gains of the summer buying season. This is the first cooling off after six monthly reports showing minimal quarterly gains. In fact, the most recent six months of the year (June – December) saw national home prices flat at -0.1 percent.

While these national quarterly numbers for December fell slightly, half of the major markets covered saw quarterly gains. Dayton, Ohio checked in at the top of highest quarterly performers with a gain of 5.0 percent. On the downside, Atlanta, Ga. showed consistent weakness as December’s lowest performing major market with a loss of -8.4 percent quarter-over-quarter.

In addition to the relatively flat home price performance, national REO saturation rates at the end of 2011 reached a new yearly low at 24.8 percent. REO saturation was volatile early in 2011, and showed consistent declines and stability toward the latter half of the year.

On the national level, 2012 is expected to play out much like the last half of 2011, with a very subtle price change. A minimal decline in the beginning of the year is expected to turn into a meager gain by year’s end. At a more granular level, half of the 50 major metro markets are expected to post gains for the year, and individual metros will experience the full gamut of price movement, from double-digit growth to double-digit drops.

Double digit volatility can be seen with the two strongest markets, including Orlando with a healthy price increase of 11.7 percent, and Bakersfield close behind with a projected 11.1 percent increase. The deepest drops come from Atlanta with an expected drop of -14.4 percent, and Los Angeles with a predicted drop of -10.3 percent.

Florida markets are expected to extend their impressive 2011 performances into 2012. Miami and Tampa are projected to be among the five highest performing metros with 8.8 percent and 7.4 percent growth, respectively, and Jacksonville is forecasted to gain 4.3 percent, placing it at a respectable eighth among the top metro markets. The exceptional growth in these markets can be a result of several factors, including being hit especially hard in the downturn. While fighting back, they remain significantly off their highs of 2006. Other factors in play in these markets include large increases in the values of their lower priced homes (near double-digits for all markets) when compared to higher priced segments of the market, and a high percentage of all cash transactions (51.8 percent) when compared to other metros. This indicates a high degree of investor activity as they look for bargains in the region, driving up demand.

Although the range of movement for U.S. prices stabilized through 2011, prices have settled at the lowest level since early 2001. The forecast for 2012 shows home prices starting with a dip in the first quarter, improving in the spring and summer buying season, and continuing to climb to 0.2 percent overall growth for 2012.

Information provided by www.realestateeconomywatch.com.