by Calculated Risk on 7/19/2011 10:28:00 AM

Earlier:
• Housing Starts increase in June

Although the number of multi-family starts can vary significantly from month to month, apartment owners have been seeing falling vacancy rates, and some have started to plan for 2012 and 2013 and have been breaking ground this year. So I've been forecasting a pickup in multi-family starts.

However, since it takes over a year on average to complete multi-family projects - and multi-family starts were at a record low last year - there will be a record low, or near record low, number of multi-family completions this year.

The following graph shows the lag between multi-family starts and completions using a 12 month rolling average.

Click on graph for larger image in graph gallery.

The blue line is for multifamily starts and the red line is for multifamily completions. Since multifamily starts collapsed in 2009, completions collapsed in 2010.

The rolling 12 month total for starts (blue line) is now above the rolling 12 month for completions (red line), and they are heading in opposite directions. Starts are picking up and completions are declining.

To summarize:
• Multi-family starts will be up strong this year, but
• Multi-family completions will be at a record low.

It is important to note that even with a strong increase in multi-family construction, it is 1) from a very low level, and 2) multi-family is a small part of residential investment (RI). Still this is bright spot for construction.

by Calculated Risk on 7/19/2011 08:45:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in June were at a seasonally adjusted annual rate of 629,000. This is 14.6 percent (±10 9%) above the revised May estimate of 549,000 and is 16.7 percent (±11.8%) above the June 2010 rate of 539,000.

Single-family housing starts in June were at a rate of 453,000; this is 9.4 percent (±11.1%)* above the revised May figure of 414,000. The June rate for units in buildings with five units or more was 170,000.

Building Permits:
Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 624,000. This is 2.5 percent (±1.3%) above the revised May rate of 609,000 and is 6.7 percent (±2.0%) above the June 2010 estimate of 585,000.

Single-family authorizations in June were at a rate of 407,000; this is 0.2 percent (±1.0%)* above the revised May figure of 406,000. Authorizations of units in buildings with five units or more were at a rate of 198,000 in June.

Click on graph for larger image in graph gallery.

Total housing starts were at 629 thousand (SAAR) in June, up 14.6% from the revised May rate of 549 thousand.

Single-family starts increased 9.4% to 453 thousand in June.

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

This shows the huge collapse following the housing bubble, and that housing starts have mostly been moving sideways for over two years - with slight ups and downs due to the home buyer tax credit.

This was above expectations of 575 thousand starts in June. Multi-family starts are increasing in 2011 - although from a very low level. This is one of the bright spots for construction and the economy this year.

I'll have more on housing starts later.

by Calculated Risk on 7/18/2011 07:59:00 PM

Note: There are various reports that the servicers are still filing documents with robo-signing. Geesh!

From Eric Wolff at the North County Times: Foreclosure auctions getting pricey

Competition at foreclosure auctions has become fierce in 2011 as more bidders battle over fewer properties, according to analysts and pricing data.

The number of bidders ballooned this spring, as small-time investors entered the market and institutional investors started buying more ...

In the first half of 2011, the median gap between opening bids and winning bids grew to the highest amount in the last five years, according to a North County Times analysis of data from ForeclosureRadar.
...
"Margins have started to dry up a lot," said Bruce May, a Vista house investor who has abandoned the auctions because of the competition.

That last comment reminds me of the famous Yogi Berra quote: "It's so crowded, nobody goes there.". The lenders would probably get higher prices if they put the auctions online and gave people better advance notice.

Earlier:
• NAHB Builder Confidence index increases in July, Still Depressed
• Residential Remodeling Index at new high in May
• Lawler: Existing Home Sales Down in June

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

by Calculated Risk on 7/18/2011 03:58:00 PM

Economist Tom Lawler sent me an update to his June forecast (about the same sales and inventory forecast as the post this weekend with more detail), from Lawler:

Based on my regional tracking of local home sales reports, I estimate that existing home sales as measured by the National Association of Realtors ran at a seasonally adjusted annual rate of about 4.71 million in June, down 2.1% from May’s pace and down 9.9% from last June’s pace. While at first glance this below-consensus forecast might seem at odds with May’s increase in pending sales, that increase followed a sharp drop in April, and pending sales tend to lead closed sales by over a month (though lags vary dramatically across areas/regions).

Last June the NAR estimated that existing home sales ran at a seasonally adjusted annual rate of 5.23 million. Looking at local realtor reports, there were only a handful of areas experiencing YOY increases in sales; some experienced modest declines; and quite a few experienced sizable YOY declines. This June had the same number of business days as last June, and this June’s seasonal factor shouldn’t be much different from last June’s.

On the inventory front, the NAR’s numbers appear to display a different seasonal pattern than do actual listing data, though I don’t have a long time series comparison. Based on the limited information I have, I expect the NAR’s inventory measure will decline by about 1.5% from May to June, and will be down about 5.7% from last June. The NAR’s inventory measure has shown decidedly smaller YOY declines this year than have actual listings, potentially suggesting that sales vs. a year ago have been weaker than the NAR’s estimates suggest.

On the pending home sales front, deriving estimates is more challenging because many realtor groups don’t report statistics on new pending sales to the public. Of course, many realtor groups don’t actually TRACK new pending sales, and as a result the NAR’s sample for pending sales is only about half as large as that used to estimate closed existing home sales. This is one of many reasons why the correlation between the NAR’s pending home sales index and closed existing home sales is not as high as one might expect.

However, based on the data I’ve seen so far, I estimate that the NAR’s pending home sales index in June will show a seasonally adjusted increase of 2.6% from May, which translates into a YOY gain of 20%. Last June, of course, pending sales were extremely depressed, as the federal home buyer tax credit – which expired based on contract signing last April – led many home buyers to accelerate planned home purchases. Based on the May and June pending sales data, existing home sales should rebound modestly in July and August.

by Calculated Risk on 7/18/2011 01:19:00 PM

The next emergency EU summit is scheduled for this coming Thursday.

Wolfgang Münchau is very concerned, from the Financial Times: Plan D stands for default and death of euro

The biggest single danger in the eurozone crisis now is that events are moving too fast ... It was a huge mistake to postpone an emergency EU summit until Thursday this week.
excerpt with permission

This is a key meeting. If there is no agreement on how to proceed, the markets could really panic.

Also many people were disappointed with the stress tests released Friday. From the WSJ: Euro Stress Tests Tell Only Half the Story

Here is what the official stress tests results didn't tell you: 27 European banks would need to raise a combined €82 billion ($155 billion) in new capital ... That is well above the €2.5 billion shortfall, spread across eight banks, announced Friday.

The €82 billion doesn't tell the full story.

Naturally bond yields are rising. A key European analyst (I can't name) put out a note last night that ended with "Run like hell."

The Greek 2 year yield is up to a record 36%.

The Portuguese 2 year yield is up to a record 20.4%.

The Irish 2 year yield is up to a record 23.2%.

And of bigger concern ... the Italian 2 year yield is up to a record 4.6%. And the Spanish 2 year yield is up to a record 4.6%.

Still much lower than Greece, Portugal and Ireland, but rising fast.

Check out the Italian and Spanish 10 year yields for more hockey sticks! Here are the links for bond yields for several countries (source: Bloomberg):

Greece	2 Year	5 Year	10 Year
Portugal	2 Year	5 Year	10 Year
Ireland	2 Year	5 Year	10 Year
Spain	2 Year	5 Year	10 Year
Italy	2 Year	5 Year	10 Year
Belgium	2 Year	5 Year	10 Year
France	2 Year	5 Year	10 Year
Germany	2 Year	5 Year	10 Year