by Calculated Risk on 7/18/2011 10:00:00 AM

The National Association of Home Builders (NAHB) reports the housing market index (HMI) increased to 15 in July from 13 in June. Any number under 50 indicates that more builders view sales conditions as poor than good.

From the NAHB: Builder Confidence Gains Two Points in July

Builder confidence in the market for newly built, single-family homes rose two points to 15 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for July, released today. The gain largely offsets a three-point dip recorded in June, and marks the ninth time out of the past 10 months in which the index has held within the same three-point range.
...
"We view the upward movement in the July HMI as a correction from an exceptionally weak number in June that was at least partly attributable to negative economic news and the close of a disappointing spring selling season," said NAHB Chief Economist David Crowe. "The strong rebound in sales expectations for the next six months likewise marks a return to trend. Basically, the market continues to bounce along the bottom, with conditions in some locations beginning to improve."
...
Two out of three of the HMI's component indexes rebounded in July from declines in the previous month. The component gauging current sales conditions rose two points to 15, returning to its May level, while the component gauging sales expectations in the next six months rose seven points to 22, which is where it stood in April. The component gauging traffic of prospective buyers held even with the previous month, at 12.

Click on graph for larger image in new window.

This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the July release for the HMI and the May data for starts (June housing starts will be released tomorrow).

Both confidence and housing starts have been moving sideways at a very depressed level for several years.

by Calculated Risk on 7/18/2011 08:12:00 AM

The BuildFax Residential Remodeling Index was at 124.3 in May, up from 109.7 in April. This is based on the number of properties pulling residential construction permits in a given month.

From BuildFax:

The Residential BuildFax Remodeling Index rose 22% year-over-year--and for the nineteenth straight month--in May to 124.3, the highest number in the index to date. Residential remodels in May were up month-over-month 14.6 points (13%) from the April value of 109.7, and up year-over-year 22.1 points from the May 2010 value of 102.2.
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All regions were up month-over-month, with the Northeast up 9.8 points (12%), the South up 7.3 points (7%), the Midwest up 16.3 points (18%), and the West up 8.7 points (7%).
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"Through the first five months of 2011 we have seen impressive gains within the remodeling index and May has continued that trend with a record setting month," said Joe Emison, Vice President of Research and Development at BuildFax. "Even with the continued struggles in the economy, the remodeling industry has been a bright spot, as consumers look to make upgrades to their current homes, rather than purchasing a new residence.”

Click on graph for larger image in graph gallery.

This is the highest level for the index (started in 2004) - even above the levels from 2004 through 2006 during the home equity ("home ATM") withdrawal boom.

Note: permits are not adjusted by value, so this doesn't mean there is more money being spent, just more permit activity. Also some smaller remodeling projects are done without permits and the index will miss that activity.

Since there is a strong seasonal pattern for remodeling, the second graph shows the year-over-year change from the same month of the previous year.

The remodeling index is up 22% from May 2010.

Even though new home construction is still moving sideways, it appears that two other components of residential investment will increase in 2011: multi-family construction and home improvement.

Data Source: BuildFax, Courtesy of Index.BuildFax.com

by Calculated Risk on 7/17/2011 08:23:00 PM

From economist Tom Lawler:

Based on what data I've seen so far, I estimate that existing home sales, as estimated by the NAR, ran at a seasonally adjusted annual rate of about 4.72 million in June, down from 4.81 million in May. That is below consensus, but is what the incoming data suggest [CR note: consensus is 4.9 million SAAR]. It's actually not shockingly inconsistent with the pending sales data, which showed a huge drop in April and then an increase in May, since the lag from pending to closed is on average over a month -- though it appears to vary a boatload across various markets.

Trying to gauge the NAR's inventory measure from actual listings data has been tricky, but as best as I can tell from the relationship between actual listings and the NAR's number, the NAR will probably report a decline in listings on the month of about 1 to 1.5%.

Pending sales in June appear to have increased slightly from May.

CR Notes: The NAR reported existing home sales at a 4.81 million (SAAR) in May, inventory of 3.72 million units, and 9.3 months of supply.

Based on Tom Lawler's estimate, this will be the lowest level of inventory in June since 2005. And sales will decline about 10% YoY from June 2010 - the last month that was boosted by the homebuyer tax credit. Months of supply would increase slightly from May.

No official word yet on when the NAR will release their benchmark revision (expected later this summer - and expected to show significant downward revisions to sales and inventory for the last several years).

Yesterday:
• Summary for Week Ending July 15th
• Schedule for Week of July 17th

by Calculated Risk on 7/17/2011 05:05:00 PM

Yesterday:
• Summary for Week Ending July 15th
• Schedule for Week of July 17th

Several readers have asked me for source data on U.S. government receipts and outlays. I've also been asked if receipts are really near a record low since WWII as a percent of GDP.

First, here is the budget data from the Congressional Budget Office (CBO). Under "Supplemental Material", the CBO provides historical budget data in both PDF and excel formats.

The White House also provides historical data on budget receipts and outlays. This is from the CBO for 2010 and earlier.

The data shows that total receipts are near a record low as a percent of GDP since WWII. The record low was in 1950, and it will be close this year (in fiscal 2011). But that masks some significant change in the mix of receipts.

The following graph shows receipts by source as a percent of GDP since WWII.

Both income (blue) and corporate taxes (red) are near record lows. Combined income and corporate taxes could rise almost 50% (as a percent of GDP) and receipts would still only be at the median for the 50 years from 1946 through 1996.

Notice the sharp decline in off-budget social insurance in 2011 (Social Security insurance). That is mostly the reduction in the payroll taxes for this year.

Also hidden in the "other" category has been the sharp reduction in the estate tax.

by Calculated Risk on 7/17/2011 12:03:00 PM

From Roger Vincent at the LA Times: Apartments are the development du jour among builders

If you see a building under construction, it's most likely an apartment complex.
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Homeownership goes in and out of favor, UCLA professor Stuart Gabriel said, and now it's in decline.

"The pendulum swings back and forth a bit," Gabriel said. "Homeownership is not dead, it's just in a period of adjustment."

Least popular are homes in remote "exurbs" far from cities, he said. With gasoline prices at sustained highs, many people want to be closer to their jobs in urban centers where the most affordable housing is often apartments.

Demographics and generational trends are also working in favor of apartments. Many renters in their 20s and 30s are delaying marriage and childbearing ... and cherish the mobility to move where their careers take them. Other young people who have moved back home with their parents or doubled up with friends can be expected to rent their own apartments when they get jobs or feel more secure about their employment.
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Permits to build nearly 1,000 apartments were issued in May in the city of Los Angeles, the most since November 2008, the Construction Industry Research Board said.

The pickup in apartment construction is one of the few bright spots for construction employment and residential investment. If there was an increase in housing starts in June, the increase was probably from multi-family starts. (June housing starts will be released on Tuesday).

It is important to note that even with a strong increase in multi-family construction, it is from a very low level, and multi-family is a small part of residential investment (RI).

However - don't expect much new office construction any time soon, from the LA Times: It's still an office tenant's market in the Southland