by Calculated Risk on 8/18/2009 01:39:00 PM

From DataQuick: Southland home sales rise again as higher-cost areas awaken

Southern California homes sold last month at the fastest clip for a July in three years and the fastest pace for any month since December 2006. ...

A total of 24,104 new and resale houses and condos closed escrow in San Diego, Orange, Los Angeles, Ventura, Riverside and San Bernardino counties last month. That was up 3.6 percent from 23,262 in June and up 18.6 percent from 20,329 a year ago, according to San Diego-based MDA DataQuick.

July’s sales total was 8.7 percent lower than the average number sold in July – 26,410 – since 1988, when DataQuick’s statistics begin. July home sales have ranged from a low of 16,225 in July 1995 to a peak of 38,996 in 2003.

Sales have increased year-over-year for 13 consecutive months. ...

Although sales of lower-cost foreclosures have tapered off, the high end of the housing market has awakened this summer from a long slumber, during which sales had been at or near record lows. July sales of existing single-family houses rose above a year ago in many coastal towns, including Manhattan Beach, Redondo Beach, Huntington Beach, Newport Beach, Carlsbad, Encinitas and La Jolla. Among the higher-cost Southland communities not posting such a gain were Malibu, Rancho Palos Verdes, Beverly Hills, Brentwood and Del Mar.
...
Last month 43.4 percent of the Southland houses and condos that resold had been foreclosed on in the prior year – the lowest level since June 2008. July’s foreclosure resales figure was down from 45.3 percent in June and from a peak 56.7 percent in February 2009.
...
“Have prices hit bottom? While some data continue to hint at that, it remains an especially risky call to make given the uncertainty over the magnitude of future job losses and foreclosures. The recent drop in foreclosure resales, coupled with the rise in high-end sales, has helped stabilize some of the regional home price measures. But there’s still quite a bit of distress out there, and plenty of unknowns with regard to how lenders and borrowers will choose to proceed,” said John Walsh, DataQuick president.
...
Investors and other absentee buyers, defined as those who will have their property tax bills sent to a different address, bought 19.4 percent of the Southland homes sold last month. That’s up from 15.5 percent a year ago and a monthly average since 2000 of about 15 percent. San Bernardino County had the highest share of absentee buyers in July: 27 percent.
...
Foreclosure activity remains near record levels ...
emphasis added

Last year sales were very low in the high end areas, so some year-over-year pickup isn't surprising. Unfortunately DataQuick didn't break out the actual numbers.

Close to 20% of properties are being bought by investors, and 43.4% are foreclosure resales. These numbers are still very high and will probably increase after the Summer.

by Calculated Risk on 8/18/2009 12:06:00 PM

Here is an excerpt on cap rates in Manhattan ...

From Bloomberg: Manhattan Office Sales Ground to Halt in First Half

The scarcity of property sales has made it hard to calculate prices and yields, [CB Richard Ellis] said.

The so-called capitalization rate, or a property’s net operating income divided by purchase price, may have risen to about 7 percent for stable, prime Manhattan office buildings, CB Richard Ellis said.

During the peak, cap rates in Manhattan got as low as about 3 percent.

The increase in cap rates suggests more than half off the peak prices of a few years ago - and probably even more since rents have fallen too (reducing operating income) and vacancy rates are rising sharply (pressuring rents more).

No wonder "buyers and sellers are far apart on bids"!

by Calculated Risk on 8/18/2009 10:00:00 AM

It appears that single-family housing starts bottomed in January of this year. Single-family starts in July were 37 percent above the January low - based on the seasonally adjusted annual rate (SAAR).

How does this compare to previous housing recoveries?

Click on graph for larger image in new window.

The first graph compares the current recovery with four previous housing recoveries. The recoveries are labeled with the month that single-family housing starts bottomed.

Starts fell to record lows in the current housing bust (adjusted for changes in population, or number of households, would make the current bust even worse).

Usually housing starts increase steadily for the first two years following a housing bottom.

The second graph shows the same data, normalized by setting the bottom for single-family housing starts to 100.

This graph shows that housing starts usually double in the two years following the bottom. Starts increased 80 percent over two years in the recovery following the Jan 1991 bottom, and 136 percent in the recovery following the Jan 1970 bottom.

If starts doubled over the two years following the Jan 2009 bottom, single-family starts would recover to 715 thousand by Jan 2011. And looking at the first graph some people might think single-family starts might recover to a 1.1 million rate within 2 years. That seems very unlikely.

I started this year looking for the bottom in single family housing starts (and I think the bottom is in), but I expect the recovery to be sluggish because of all the excess housing units, and also because of the ongoing decline in the homeownership rate. I'll have more on this later - but hopefully these graphs show what many people expect.

by Calculated Risk on 8/18/2009 08:30:00 AM

Click on graph for larger image in new window.

Total housing starts were at 581 thousand (SAAR) in July, off slightly from June, but up sharply over the last three months from the all time record low in April of 479 thousand (the lowest level since the Census Bureau began tracking housing starts in 1959).

Single-family starts were at 490 thousand (SAAR) in July, up slightly from June; 37 percent above the record low in January and February (357 thousand).

Permits for single-family units were 458 thousand in July, suggesting single-family starts might decline slightly in August.

Here is the Census Bureau report on housing Permits, Starts and Completions.

Building Permits:
Privately-owned housing units authorized by building permits in July were at a seasonally adjusted annual rate of 560,000. This is 1.8 percent (±1.4%) below the revised June rate of 570,000 and is 39.4 percent (±1.8%) below the July 2008 estimate of 924,000.

Single-family authorizations in July were at a rate of 458,000; this is 5.8 percent (±1.1%) above the revised June figure of 433,000.

Housing Starts:
Privately-owned housing starts in July were at a seasonally adjusted annual rate of 581,000. This is 1.0 percent (±8.5%)* below the revised June estimate of 587,000 and is 37.7 percent (±5.1%) below the July 2008 rate of 933,000.

Single-family housing starts in July were at a rate of 490,000; this is 1.7 percent (±7.1%)* above the revised June figure of 482,000.

Housing Completions:
Privately-owned housing completions in July were at a seasonally adjusted annual rate of 802,000. This is 0.9 percent (±10.1%)* below the revised June estimate of 809,000 and is 26.4 percent (±6.9%) below the July 2008 rate of 1,089,000.

Single-family housing completions in July were at a rate of 491,000; this is 4.1 percent (±8.9%)* below the revised June figure of 512,000.

Note that single-family completions of 491 thousand are at the same level as single-family starts (490 thousand).

It now appears that single family starts bottomed in January. However I expect starts to remain at fairly low levels for some time as the excess inventory is worked off.

by Calculated Risk on 8/17/2009 10:45:00 PM

As I follow up to my post Sunday, Health Care Spending and PCE, here is an animation of the U.S population distribution, by age, from 1950 through 2050. The population data and estimates are from the Census Bureau.

Note: the third graph (link) is a Dynamic Population Pyramid of the same data from the Census Bureau.

Watch for the original baby bust preceding the baby boom. Those are the people currently in retirement. With the original baby bust now at the age of peak health care expenses, these are the best of times (from a demographics perspective) for health care.

Animation updates every 2 seconds.

Click on graph for larger image in new window.

The second graph is from the Department of Health & Human Services.

Although it would be interesting to break down health care expense by more age groups - this graph does shows that health care expenses are almost three times higher for those over 65 than those under 65. So - in the first graph - as the baby boomers move into the last 4 columns, the health care expenses will rise sharply.

And from the Census Bureau: Dynamic Population Pyramid (1950 - 2050) (note: Iframe version removed - Census Bureau site was slowing down)

Super cool graph. The first graph is in percentages, the one from the Census Bureau is in actual numbers. For you Harold and Maude fans, there will be a lot of older women in 2050.