by Calculated Risk on 3/23/2011 12:49:00 PM

Another update ... this graph shows existing home sales (left axis) and new home sales (right axis) through February. This graph starts in 1994, but the relationship has been fairly steady back to the '60s. Then along came the housing bubble and bust, and the "distressing gap" appeared (due mostly to distressed sales).

Click on graph for larger image in graph gallery.

The gap is due mostly to the flood of distressed sales. This has kept existing home sales elevated, and depressed new home sales since builders can't compete with the low prices of all the foreclosed properties.

Note: it is important to note that existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

In a few years - when the excess housing inventory is absorbed and the number of distressed sales has declined significantly - I expect existing home-to-new home sales to return to something close to this historical relationship.

Note: The National Association of Realtors (NAR) is working on a benchmark revision for existing home sales numbers. As I noted in January, this benchmarking is expected to result in significant downward revisions to sales estimates for the last few years - perhaps as much as 10% to 15% for 2009 and 2010. Even with these revisions, most of the following "distressing gap" will remain.

Existing Home sales for February:
• February Existing Home Sales: 4.88 million SAAR, 8.6 months of supply
• Existing Home Inventory decreases 1.2% Year over Year
• Existing Home Sales and Inventory Graphs

New home sales for February:
• New Home Sales Fall to Record Low in February
• New Home Sales and Inventory Graphs

by Calculated Risk on 3/23/2011 10:00:00 AM

The Census Bureau reports New Home Sales in February were at a seasonally adjusted annual rate (SAAR) of 250 thousand. This was down from a revised 301 thousand in January.

Click on graph for larger image in graph gallery.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Sales of new single-family houses in February 2011 were at a seasonally adjusted annual rate of 250,000 ... This is 16 9 percent 16.9 (±19.1%)* below the revised January rate of 301,000 and is 28.0 percent (±14.8%) below the February 2010 estimate of 347,000.

And a long term graph for New Home Months of Supply:

Months of supply increased to 8.9 in February from 7.4 months in January. The all time record was 12.1 months of supply in January 2009. This is very high (less than 6 months supply is normal).

The seasonally adjusted estimate of new houses for sale at the end of February was 186,000. This represents a supply of 8.9 months at the current sales rate.

On inventory, according to the Census Bureau:

"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

This graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale fell to 76,000 units in February. The combined total of completed and under construction is at the lowest level since this series started.

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In February 2010 (red column), 19 thousand new homes were sold (NSA). This is a new record low for the month of February.

The previous record low for February was 27 thousand in 2010. The high was 109 thousand in 2005.

This was a new record low sales rate and well below the consensus forecast of 290 thousand homes sold (SAAR). Another very weak report ...

by Calculated Risk on 3/23/2011 07:43:00 AM

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

The Refinance Index increased 2.7 percent from the previous week. The seasonally adjusted Purchase Index increased 2.7 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages increased to 4.80 percent from 4.79 percent, with points decreasing to 0.96 from 1.07 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Click on graph for larger image in graph gallery.

This graph shows the MBA Purchase Index and four week moving average since 1990.

The four-week moving average of the purchase index is still at 1997 levels, and even with the large percentage of cash buyers recently, this still suggests fairly weak home sales through April. Note: Refinance activity has picked up a little with lower mortgage rates.

by Calculated Risk on 3/23/2011 12:01:00 AM

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

From the American Institute of Architects: Architecture Firm Billings Increase Slightly in February

The Architecture Billings Index (ABI) score of 50.6 for February indicates that very modest growth occurred at architecture firms that month. Although the pace of growth has slowed from the end of 2010, February still marks the fourth consecutive month that the ABI has been 50 or higher; an encouraging sign for a recovery. In addition, inquiries into new projects remain strong at firms.

Click on graph for larger image in graph gallery.

This graph shows the Architecture Billings Index since 1996. The index showed billings were slightly higher in February (at 50.6).

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 indicator suggests the drag from CRE investment will end mid-year 2011 or so - but there won't be a strong increase in investment.

by Calculated Risk on 3/22/2011 09:52:00 PM

There is more stress in Europe ahead of the meeting of all 27 EU leaders in Brussels on Thursday and Friday ...
• From the Guardian: Portugal edges towards 'inevitable' bailout from EU partners

Ireland's borrowing costs rose dramatically today in rumour-driven markets as speculation mounted that Portugal was also edging towards a bailout from its European partners.

Troubled Allied Irish Banks was forced to officially denounce widespread rumours that it was set to miss a crucial repayment on one of its bonds ... Portugal was also being battered ahead of a key vote on an austerity budget on Wednesday, which the prime minister José Sócrates is expected to lose.

• From the Irish Times: Borrowing costs rise for Ireland, Greece and Portugal

It does seem a bailout for Portugal is now "inevitable", although the Irish Times notes a Portuguese "caretaker administration might not have legal powers to seek emergency financial aid" ... an interesting twist.