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Wednesday, June 22, 2011

MBA: Mortgage Purchase Application activity decreases

by Calculated Risk on 6/22/2011 07:36:00 AM

The MBA reports: Mortgage Applications Decrease in Latest MBA Weekly Survey

The Refinance Index decreased 7.2 percent from the previous week. The seasonally adjusted Purchase Index decreased 2.8 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages increased to 4.57 percent from 4.51 percent, with points decreasing to 0.91 from 1.04 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.
The following graph shows the MBA Purchase Index and four week moving average since 1990.

MBA Purchase Index Click on graph for larger image in graph gallery.

The four week average of purchase activity is still at about 1997 levels - and mostly moving sideways. Of course there is a very high percentage of cash buyers right now, but this suggests weak existing home sales through July.

AIA: Architecture Billings Index indicates declining demand in May

by Calculated Risk on 6/22/2011 12:15:00 AM

Note: This index is a leading indicator for new Commercial Real Estate (CRE) investment.

From the WSJ: Momentum Gone in Design Services

The Architecture Billings Index decreased again last month, dropping to 47.2 during May from 47.6 in the previous month [according to the American Institute of Architects (AIA)].
...
"Whatever positive momentum that there had been seen in late 2010 and earlier this year has disappeared," said Kermit Baker, chief economist of the American Institute of Architects.
AIA Architecture Billing Index Click on graph for larger image in graph gallery.

This graph shows the Architecture Billings Index since 1996. The index decreased in May to 47.2 from 47.6 in April. Anything below 50 indicates a decrease in billings.

Note: Nonresidential construction includes commercial and industrial facilities like hotels and office buildings, as well as schools, hospitals and other institutions.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. So this suggests another dip in CRE investment towards the end of this year - and into 2012.

Tuesday, June 21, 2011

Irvine: Luxury Condos become Rental Apartments

by Calculated Risk on 6/21/2011 09:32:00 PM

From the O.C. Register: Luxury Irvine condo towers go rental (ht SGIP)

The luxe new high-rise condos at Astoria in Irvine’s Central Park West are no longer for sale — they’re for rent.
...
The apartments at Astoria, once priced to sell from $415,000 to $779,000 – along with homeowner association (HOA) dues ranging from $915 to $965 a month — now rent beginning at $2,590.
This is part of the Central Park West project in Irvine. This project was built by Lennar and mothballed in 2007. Part of the project was brought back on the market in 2010, but they only sold six condos since then in this high rise building - so it is time to convert them to rentals!

This is shadow inventory that I expect will be converted back to condos eventually.

Earlier:
FOMC Meeting Preview
May Existing Home Sales: 4.81 million SAAR, 9.3 months of supply
Existing Home Sales: Comments and NSA Graph
Existing Home Sales graphs

Misc: ARMs Comeback, Greek TV, and More

by Calculated Risk on 6/21/2011 03:35:00 PM

UPDATE: No surprise, from CNBC: Greek PM Wins Crucial Vote, But Outlook Remains Dire

• From Tara Siegel Bernard: Borrowers Wade Back Into Adjustable-Rate Mortgages. CR Note: We have to remember that not all ARMs are bad - just like not all "subprime" is bad. During the bubble, many borrowers didn't understand the product and were frequently qualified at an absurdly low teaser rate - if they were qualified at all, with little or no proof of income. As long as people understand the terms, and the underwriting is solid - this probably isn't too bad (although I'm sure there are people who will get burned).

• The Greek confidence vote is scheduled to start at 5 PM ET. Here is the online Greek TV (it is all Greek to me). It is pretty clear that Prime Minister Papandreou will receive a vote of confidence (just more theater - like the debt ceiling charade in the U.S.). So they will receive a few billion more ...

• Here is the Conference of Mayor's report with some local data: U.S. Metro Economies Report: 2011 Release

• And from the LA Times: Controller says he won’t pay legislators

California lawmakers must forfeit their pay as of mid-June because the budget they passed last week -- which Gov. Jerry Brown vetoed less than 24 hours later -– was not balanced, the state controller said Tuesday.
...
Voters approved a law last fall that empowered legislators to pass a budget with a simple majority vote but also threatened to strip them of pay for every day the blueprint is late. The measure makes no mention of approving a balanced budget, but other laws on the books dictate that state budgets be balanced.
Earlier:
FOMC Meeting Preview
May Existing Home Sales: 4.81 million SAAR, 9.3 months of supply
Existing Home Sales: Comments and NSA Graph
Existing Home Sales graphs

Existing Home Sales: Comments and NSA Graph

by Calculated Risk on 6/21/2011 12:15:00 PM

A few comments and a graph (of course):

• There was no mention of the "benchmark revision" that was supposed to be announced this summer (Summer starts now!). I was hoping for at least a mention on the timing of the release. This revision is expected to show significant fewer homes sold over the last few years (perhaps 10% to 15% fewer homes in 2010), and also fewer homes for sale.

Hopefully the NAR will provide an update soon - and hopefully the NAR will provide 1) the revised data for the last decade and 2) a description of the new methodology (as part of this revision, the NAR is expected to change their method for estimating sales and inventory).

• The NAR continues to complain about lending standards. NAR economist Lawrence Yun said: “There’s been a pendulum swing from very loose standards which led to the housing boom to unnecessarily restrictive practices as an overreaction to the housing correction – this overreaction is clearly holding back the recovery.”

Actually standards are fairly reasonable for qualified buyers. Of course many qualified buyers bought last year - using the ill-considered homebuyer tax credit - and that pulled demand forward. The housing market is still paying the price for that policy mistake.

Of course the NAR never complained about the "very loose standards" during the housing bubble!

• The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Existing Home Sales NSA Click on graph for larger image in graph gallery.

The red columns are for 2011.

Sales NSA are well below the tax credit boosted level of sales in May 2010, but slightly above the level of May sales in 2009. The level of sales is still elevated due to investor buying. The NAR noted:

All-cash transactions stood at 30 percent in May, down from 31 percent in April; they were 25 percent in May 2010; investors account for the bulk of cash purchases.

First-time buyers purchased 35 percent of homes in May, down from 36 percent in April; they were 46 percent in May 2010 when the tax credit was in place. Investors accounted for 19 percent of purchase activity in May compared with 20 percent in April; they were 14 percent in May 2010.
• As Tom Lawler noted yesterday, the Pending Home Sales Index will probably show a significant increase in May - so reported sales in June and July will probably be higher. The Pending Home Sales Index will be released on Wednesday June 29th.

Earlier:
FOMC Meeting Preview
May Existing Home Sales: 4.81 million SAAR, 9.3 months of supply
Existing Home Sales graphs