by Calculated Risk on 12/19/2012 06:57:00 PM

Towards the end of each year I collect some housing forecasts for the following year.

Here was a summary of forecasts for 2012. Right now it looks like new home sales will be around 370 thousand this year, and total starts around 770 thousand or so.  Tom Lawler, John Burns and David Crowe (NAHB) were all very close on New Home sales for 2012.  Lawler was the closest on housing starts.

The table below shows several forecasts for 2013. (several analysts were kind enough to share their forecasts - thanks!)

From Fannie Mae: Housing Forecast: November 2012

From NAHB: Housing and Interest Rate Forecast, 11/29/2012 (excel)

I haven't worked up a forecast yet for 2013. I've heard there are some lot issues for some of the builders (not improved until 2014), and that might limit supply. In general I expect prices to increase around the rate of inflation, and to see another solid increase in 2013 for new home sales and housing starts.

Housing Forecasts for 2013
	New Home Sales (000s)	Single Family Starts (000s)	Total Starts (000s)	House Prices1
NAHB	447	641	910	1.6%
Fannie Mae	452	659	936	1.6%2
Merrill Lynch	466		976	2.6%
Barclays	424		988	4.8%3
Wells Fargo	460	680	990	2.6%
Moody's Analytics	500	820	1190	1.4%
1Case-Shiller unless indicated otherwise 2FHFA Purchase-Only Index 3Corelogic
2011 Actual	306	431	609	-4.0%
2012 Estimate	370	535	770	6.0%

by Calculated Risk on 12/19/2012 04:48:00 PM

From economist Tom Lawler:

"Based on realtor/MLS reports released through today, I have increased my estimate of November existing home sales (as measured by the National Association of Realtors) to a seasonally adjusted annual rate of 5.10 million, up 6.5% from October’s pace, and up 15.9% from last November’s pace."

CR Note: The NAR will report November existing home sales tomorrow, Thursday, Dec 20th. The consensus is the NAR will report sales of 4.85 million.

Based on Lawler's estimates, the NAR will report inventory around 2.05 million units for November, and months-of-supply might be under 5 months. This would be the lowest level of inventory in over 10 years, and the lowest months-of-supply since 2005.

Tom Lawler also sent me some distressed sales data for a few more cities in November. 

One of the key changes this year has been the dramatic decline in distressed sales.  As the table shows, distressed sales are down everywhere (Chicago is close), foreclosure sales are down everywhere, and short sales are mixed (there is a clear shift from foreclosures to short sales).

The decline in the percent distressed means conventional sales are up even more than total sales.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share
	12-Nov	11-Nov	12-Nov	11-Nov	12-Nov	11-Nov
Las Vegas	41.2%	26.8%	10.7%	46.0%	51.9%	72.8%
Reno	41.0%	36.0%	9.0%	35.0%	50.0%	71.0%
Phoenix	23.2%	29.6%	12.9%	29.8%	36.1%	59.4%
Sacramento	36.1%	29.8%	11.5%	34.3%	47.6%	64.1%
Minneapolis	11.2%	13.8%	24.6%	34.8%	35.8%	48.7%
Mid-Atlantic (MRIS)	11.9%	13.7%	8.7%	14.2%	20.6%	27.9%
Orlando	29.0%	37.2%	20.9%	22.8%	49.9%	60.0%
California (DQ)*	26.3%	24.9%	16.9%	32.9%	43.2%	57.8%
So. California (DQ)*	26.6%	25.4%	15.3%	31.6%	41.9%	57.0%
Hampton Roads VA					28.3%	33.0%
Northeast Florida					42.2%	48.0%
Chicago					43.0%	43.1%
Charlotte					13.3%	18.3%
Atlanta			30.0%	46.0%
Houston			15.0%	20.2%
Spokane			9.2%	22.4%
Memphis*			24.3%	31.3%
Birmingham AL			26.5%	34.5%
Metro Detroit			33.6%	38.7%
*share of existing home sales, based on property records

by Calculated Risk on 12/19/2012 02:41:00 PM

A few key points:

• Housing starts are on pace to increase about 25% in 2012. This is a solid year-over-year increase, and residential investment is now making a positive contribution to GDP growth.

• Even after increasing 25% in 2012, the approximately 770 thousand housing starts this year will still be the 4th lowest on an annual basis since the Census Bureau started tracking starts in 1959 (the three lowest years were 2009 through 2011). Starts averaged 1.5 million per year from 1959 through 2000, and demographics and household formation suggests starts will return to close to that level over the next few years. That means starts will come close to doubling from the 2012 level.

• Residential investment and housing starts are usually the best leading indicator for economy. Nothing is foolproof, but this suggests the economy will continue to grow over the next couple of years.

Here is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment).

These graphs use a 12 month rolling total for NSA starts and completions.

Click on graph for larger image.

The blue line is for multifamily starts and the red line is for multifamily completions.

The rolling 12 month total for starts (blue line) has been increasing steadily, and completions (red line) is lagging behind - but completions will follow starts up (completions lag starts by about 12 months).

This means there will be an increase in multi-family deliveries next year, but still well below the 1997 through 2007 level of multi-family completions.

The second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions.

Starts are moving up, but the increase in completions has just started.  Usually single family starts bounce back quickly after a recession, but not this time because of the large overhang of existing housing units. 

Note the low level of single family starts and completions.  The "wide bottom" was what I was forecasting several years ago, and now I expect several years of increasing single family starts and completions.

by Calculated Risk on 12/19/2012 12:15:00 PM

Zillow Forecast: October Case-Shiller Composite-20 Expected to Show 4.1% Increase from One Year Ago

On Wednesday December 26th, the Case-Shiller Composite Home Price Indices for October will be released. Zillow predicts that the 20-City Composite Home Price Index (non-seasonally adjusted [NSA]) will be up by 4.1 percent on a year-over-year basis, while the 10-City Composite Home Price Index (NSA) will be up 3.1 percent on a year-over-year basis. The seasonally adjusted (SA) month-over-month change from September to October will be 0.3 percent for the 20-City Composite and 0.1 percent for the 10-City Composite Home Price Index (SA). All forecasts are shown in the table below and are based on a model incorporating the previous data points of the Case-Shiller series, the October Zillow Home Value Index data and national foreclosure re-sales.

As we had previously discussed, monthly appreciation has slowed and will eventually turn negative in the last months of 2012. This slowdown is in large part due to Case-Shiller’s mix of distressed and non-distressed properties in the same index, as they include foreclosure re-sales. As the market slows down a bit and fewer homes are listed, foreclosure re-sales will make up a larger part of the transactional mix and will therefore skew the Case-Shiller Indices to be more negative. Despite this slowdown, home values are still higher this year than they were at this same time last year.

Zillow's forecasts for Case-Shiller have been pretty close.  Right now it looks like Case-Shiller will be up close to 6% for 2013 (through the December / Q4 reports to be released next year).

		Case Shiller Composite 10		Case Shiller Composite 20
		NSA	SA	NSA	SA
Case Shiller (year ago)	Oct 2011	153.54	151.55	140.05	138.21
Case-Shiller (last month)	Sept 2012	158.93	155.63	146.22	143.15
Zillow Oct Forecast	YoY	3.1%	3.1%	4.1%	4.1%
	MoM	-0.4%	0.1%	-0.3%	0.3%
Zillow Forecasts1		158.3	156.0	145.8	143.7
Current Post Bubble Low		146.46	149.39	134.07	136.66
Date of Post Bubble Low		Mar-12	Jan-12	Mar-12	Jan-12
Above Post Bubble Low		8.1%	4.4%	8.7%	5.2%
1Estimate based on Year-over-year and Month-over-month Zillow forecasts

by Calculated Risk on 12/19/2012 10:25:00 AM

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

From AIA: Architecture Billings Index Signaling Gains for Fourth Straight Month

Billings at architecture firms across the country continue to increase. As a leading economic indicator of construction activity, the Architecture Billings Index (ABI) reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the November ABI score was 53.2, up from the mark of 52.8 in October. This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 59.6, up slightly from the 59.4 mark of the previous month.

“These are the strongest business conditions we have seen since the end of 2007 before the construction market collapse,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “The real question now is if the federal budget situation gets cleared up which will likely lead to the green lighting of numerous projects currently on hold. If we do end up going off the ‘fiscal cliff’ then we can expect a significant setback for the entire design and construction industry.”

• Regional averages: Northeast (56.3), Midwest (54.4), South (51.1), West (49.6)

• Sector index breakdown: multi-family residential (55.9), mixed practice (53.9), commercial / industrial (52.0), institutional (50.5)
emphasis added

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 53.2 in November, up from 52.8 in October. Anything above 50 indicates expansion in demand for architects' services.

This increase is mostly being driven by demand for design of multi-family residential buildings, but every building sector is now expanding. New project inquiries are also increasing. Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, 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. This suggests some increase in CRE investment next year.

by Calculated Risk on 12/19/2012 08:44:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in November were at a seasonally adjusted annual rate of 861,000. This is 3.0 percent below the revised October estimate of 888,000, but is 21.6 percent (±12.5%) above the November 2011 rate of 708,000.

Single-family housing starts in November were at a rate of 565,000; this is 4.1 percent below the revised October figure of 589,000. The November rate for units in buildings with five units or more was 285,000.

Building Permits:
Privately-owned housing units authorized by building permits in November were at a seasonally adjusted annual rate of 899,000. This is 3.6 percent above the revised October rate of 868,000 and is 26.8 percent above the November 2011 estimate of 709,000.

Single-family authorizations in November were at a rate of 565,000; this is 0.2 percent below the revised October figure of 566,000. Authorizations of units in buildings with five units or more were at a rate of 307,000 in November.

Click on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) decreased slightly from October.

Single-family starts (blue) decreased to 565,000 thousand in November.

The second graph shows total and single unit starts since 1968.

This shows the huge collapse following the housing bubble, and that total housing starts have been increasing lately after moving sideways for about two years and a half years.

Total housing starts were at 861 thousand (SAAR) in November, down 3.0% from the revised October rate of 888 thousand (SAAR).

Total starts are up about 80% from the bottom start rate, and single family starts are up about 60% from the low.

This was slightly below expectations of 865 thousand starts in November. Starts in November were up 21.6% from November 2011, and right now starts are on pace to be up about 25% from 2011. I'll have more soon ...

All Housing Investment and Construction Graphs

by Calculated Risk on 12/19/2012 07:01:00 AM

From the MBA: Refinance Applications Fall to Lowest Level in Over a Month in Latest MBA Weekly Survey

The Refinance Index decreased 14 percent from the previous week to the lowest level since week ending November 2, 2012. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier. ...

“Despite the Federal Reserve’s announcement last week that it would purchase an additional $45 billion in Treasury securities per month as part of its continuing quantitative easing effort, rates increased in the second half of the week,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “As a result, refinance applications dropped sharply to the lowest level in over a month.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.50 percent from 3.47 percent, with points increasing to 0.44 from 0.36 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

Click on graph for larger image.

This graph shows the MBA mortgage purchase index.

Although the purchase index declined 5% this week, the 4-week average is up about 25% from the post-bubble low.

by Calculated Risk on 12/18/2012 08:16:00 PM

The following table shows annual starts (total and single family) since 2005, an estimate for 2012, and a 2013 "consensus" based on several forecasts.  I expect another solid growth year for housing starts in 2013 (with the usual Congressional caveats).

Note: from 1959 through 2000, housing starts average 1.5 million per year. The forecasts for 2013 would still be the sixth lowest year since 1959, with only 2008 through 2012 lower.

Housing Starts (000s)
	Total	Change	Single Family	Change
2005	2,068.3	---	1,715.8	---
2006	1,800.9	-12.9%	1,465.4	-14.6%
2007	1,355.0	-24.8%	1,046.0	-28.6%
2008	905.5	-33.2%	622.0	-40.5%
2009	554.0	-38.8%	445.1	-28.4%
2010	586.9	5.9%	471.2	5.9%
2011	608.8	3.7%	430.6	-8.6%
20121	770.0	26%	530.0	23%
20132	960.0	25%	660.0	25%
12012 estimated. 2early 2013 consensus based on several forecasts

Wednesday economic releases:
• At 7:00 AM ET, the Mortgage Bankers Association (MBA) will release the mortgage purchase applications index.

• At 8:30 AM, Housing Starts for November will be released. The consensus is for total housing starts to decline to 865,000 Seasonally Adjusted Annual Rate (SAAR) in November, down from 894,000 in October. Note: In November 2011, housing starts were above 700,000 (SAAR) for the first time in several years - it was considered a blow out month. Now expectations are for starts to be up more than 20% from that level.

• During the day: The AIA's Architecture Billings Index for November (a leading indicator for commercial real estate).


Another question for the December economic prediction contest (Note: You can use Facebook, Twitter, or OpenID to log in).

by Calculated Risk on 12/18/2012 03:10:00 PM

From Realtor.com: November 2012 Real Estate Data

Flat list prices—a leading indicator of future house price trends—most likely signal a slowdown in the recent rate of house price appreciation. At the same time, historically low inventories suggest that significant price concessions on the part of home sellers may be coming to an end. How these potentially offsetting trends play out in the housing market will depend on a variety of factors, including potential buyers’ optimism regarding the continued strength of the overall economy.

The total U.S. for-sale inventory of single family homes, condos, townhomes and co-ops (SFH/CTHCOPS) dropped to its lowest point since 2007, with 1.674 million units for sale in November, down 16.87 percent compared to a year ago and more than 45 percent below its peak of 3.1 million units in September 2007, when Realtor.com began monitoring these markets. The median age of the inventory was also down by 11.4 percent on a year-over-year basis. However, the median list price in November ($189,900) was the same as it was a year ago despite the significant gains observed earlier in the year.
...
The national for-sale inventory of SFH/CTHCOPS in November (1,674,412) decreased (4.69 percent) from what it was in October and was down by 16.87 percent on an annual basis.

Note: Realtor.com only started tracking inventory in September 2007, but this is probably the lowest level in a decade.  On a month-over-month basis, inventory declined 4.7%, and declined in 133 of 146 markets.

Going forward, I expect to see smaller year-over-year declines simply because inventory is already very low.

The NAR is scheduled to report November existing home sales and inventory on Thursday, December 20th. A key number in the NAR report will be inventory, and inventory will be down sharply again year-over-year in November.

by Calculated Risk on 12/18/2012 01:37:00 PM

I try to ignore the fiscal cliff, but I do read the Wonkblog daily for updates.

From Suzy Khimm at the Wonkblog: Five sticking points in the fiscal cliff deal

President Obama’s latest fiscal cliff offer has brought the outlines of a final deal into focus. But there are still some major sticking points and outstanding questions that have to be resolved before a final deal will be able to pass Congress.

Here are the five issues Khimm identifies:

1) Will low-income seniors be protected from Social Security cuts? If so, how?
...
2) Will House Republicans go along with tax hikes?
...
3) How much short-term stimulus will survive in a final deal?
...
4) What kind of enforcement mechanism will be attached to the health-care cuts?
...
5) How will the debt ceiling be resolved?

And on the AMT from Mark Koba at CNBC: Will 'Fiscal Cliff' Deal Include Cap on the AMT?

President Barack Obama's latest proposal in the "Fiscal Cliff" talks includes an offer to permanently cap the Alternative Minimum Tax ... Right now, some 29 million more Americans—in addition to the current 4 million—could be subject to the AMT in their 2012 returns if no agreement is reached on the fiscal cliff. ... That's because the AMT has never been indexed to inflation, so every year more Americans are caught up in it. Congress has traditionally created patches in years past to keep the AMT from clobbering more taxpayers, but so far no patch has been put up for a vote for tax year 2012.

Finding a permanent fix to the AMT would be a small positive step.