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Thursday, June 28, 2012

U.S. Home Prices Rise in April for a Third Month, FHFA Says

U.S. house prices rose 0.8% in April from the previous month, the third straight advance, as the property market shows signs of stabilization, the Federal Housing Finance Agency said. Consensus expectations were calling for a 0.4% gain. Prices jumped 3% from a year earlier. Job gains, low interest rates and a tight supply of homes for sale are boosting property prices following the worst slump since the Great Depression. The FHFA index, which measures price changes of single-family houses, showed increases in six of the nine regions covered on a seasonally adjusted basis.

Builder Confidence Reaches Five Year High in June

Builder confidence ticked up in June to reach the highest level seen since May 2007, according to the National Association of Home Builders/Wells Fargo Housing Market Index, released today. The index was up one point for the month for a reading of 29. “This month’s modest uptick in builder confidence comes on the heels of a four-point gain in May and is reflective of the continued, gradual improvement we are seeing in many individual housing markets as more buyers decide to take advantage of today’s low prices and interest rates,” said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB).

Housing Starts Disappoint in May, but Permits Soar

Housing starts were weaker than expected in
May, increasing 29% y/y to 708K units (SAAR) but came in below consensus expectations of 722K.
Starts slipped 5% m/m from an upwardly revised reading of 744K units in April vs. 717K units as
previously reported. We note the dataset is prone to heavy revision with a historical margin of error
near 20% due to a small sample size, with upward revisions ranging from +4-7% in the last two
months. All told, while this month’s headline reading was relatively disappointing, it was driven
largely by weakness in multifamily construction. However, single-family starts improved on both a
sequential and y/y basis. Lastly, forward looking permits climbed to the highest level since Sept
2008. Permits increased 8% m/m and 25% y/y to 780K units, well ahead of consensus expectations of
730K units (flat m/m). The data indicated a 26% y/y improvement in single-family starts to 516K
units, a five-month high. Meanwhile, multifamily starts increased 32% y/y. The 3.2% sequential
improvement in single-family starts was considerably better than historical sequential improvements
which tended to average +40bps since the data was first recorded. Meanwhile, multifamily
underperformed meaningfully, slipping 24% on a sequential basis. Performance was mixed on a
regional basis.

Wednesday, June 20, 2012

Sellers’ Asking Prices Jumped in May

Median asking prices hit their highest level in two and a half years in May, the latest sign that sellers are feeling brighter about their prospects amid slimmer pickings of homes listed for sale. Median asking prices rose to $194,400, up 1.9% from April and 3.2% from one year ago, according to data released Wednesday by Realtor.com.

Commercial Property Value Index Increases

Green Street Advisors’ valuation index, which tracks
properties owned by U.S. real estate investment trusts, increased 2% in May and is now 6% below
the high it hit in 2007. Values have now risen 53% since the firm’s Commercial Property Price Index
hit its trough in May 2009. But most of that rise took place between then and the first half of 2011.
The index has only risen 5% in the last 12 months, according to the firm. Lower-quality commercial
property in weaker locations has seen less price appreciation since the downturn hit, according to
analysts Green Street. Demand has been strong among institutions for high-quality commercial
properties with steady cash flows because such assets are viewed as relatively safe investments,
while their yields are attractive in a low interest rate environment.
Source: The Wall Street Journal

Cleveland Research: Buyers Frustrated by Low Inventory, Rising Prices

Active home buyers are increasingly concerned about rising prices, prompting a growing number to slow down their purchase plans, according to a new survey by real-estate brokerage firm Redfin. The company found that 49% of respondents believe that it’s a good time to buy a home, down from 56% last quarter. The share of buyers who think it’s a good time to sell more than doubled, to 28% of respondents. Nearly six in 10 respondents said that low inventory remained their top concern with buying right now—by far the
most predominant worry of buyers. The supply of homes listed for sale nationally is down by 20%
from one year ago, and markets such as Phoenix, Orlando and Oakland, Calif., have around half as
many homes for sale as one year ago. More than seven in 10 buyers said they had faced a
competing offer when making an offer for a home. Given those experiences, perhaps it isn’t
surprising that 58% of buyers said they think prices will increase, up from 34% last quarter.
Meanwhile, just 9% of buyers said that concerns about falling prices were making them reluctant to
buy right now, down from 29% three months ago. The lack of supply and the uptick in multiple offer
situations is surprising to many buyers and could lead some frustrated buyers to stand back. More
than one-quarter of buyers said they would stand back from the market if prices went up or they
were in a multiple-offer situation, while 10% of respondents said they’d do what it takes to win a
competitive bid. The survey also found that 16% of buyers were worried about fatigue from bidding
wars and that 21% were concerned about prices rising beyond what they could afford. Inventories
are also low because banks have put fewer foreclosed properties on the market. The Redfin survey
found that 57% of buyers were very interested in conventional sales, up from 48% three months
ago. Buyer interest for new homes, foreclosures, and short sales showed little change from last
quarter.
Source: The Wall Street Journal

Wells Fargo: The Fiscal Cliff: Likelihood and Economic Impact

As we approach the second half of 2012, fiscal policy uncertainty will continue to build around the rapidly approaching “fiscal cliff” of significant tax increases and large government spending cuts that are set to take place beginning in January 2013. In our 2012 Annual Outlook, we noted that one of the major risks to our forecast was ongoing political uncertainty that would put downward pressure on consumer spending and business investment, and thus headline GDP growth. As the economic data have begun to unfold in the middle of this year, we are beginning to see the first signs of growth softening in response to that uncertainty. We attribute the bulk of the weaker economic data to deteriorating economic conditions globally; however, recent academic work has provided evidence that increases in policy uncertainty can damage the economy. Thus, some have argued that the recent pullback in economic indicators may be attributed to increasing political uncertainty.

Housing Starts Slip in May, but Permits Strengthen

New home construction continues to recover, despite May’s 4.8 percent drop in housing starts. April’s starts
were revised sharply higher and building permits rose a solid 7.9 percent from April’s upwardly revised pace.

Saturday, June 2, 2012

Construction Spending Continues to Improve in April


Construction spending rose 0.3 percent in April, but revisions to previous months’ data suggest activity was a bit better than first reported. Residential outlays rose 2.6 percent, while nonresidential fell 0.7 percent