by Calculated Risk on 2/19/2013 09:12:00 AM

From BuildFax:

Residential remodels authorized by building permits in the United States in December were at a seasonally-adjusted annual rate of 2,725,000. This is 6 percent below the revised November rate of 2,895,000 and is 6 percent below the December 2011 estimate of 2,901,000.

Seasonally-adjusted annual rates of remodeling across the country in December 2012 are estimated as follows: Northeast, 636,000 (up 39% from November and up 37% from December 2011); South, 1,088,000 (down 13% from November and down 1% from December 2011); Midwest, 596,000 (down 8% from November and down 17% from December 2011); West, 777,000 (down 16% from November and down 8% from December 2011).

"Repairs from super-storm Sandy attributed to the influx of Northeastern residential remodeling in December," said Joe Emison, Chief Technology Officer at BuildFax. "The last time the Northeast broke 600,000 estimated residential remodels was five years ago. Unfortunately, the rest of the country saw both month-over-month and year-over-year declines in residential remodeling activity."

The BuildFax Remodeling Index (BFRI) is based on construction permits for residential remodeling projects filed with local building departments across the country. The index estimates the number of properties permitted.

Click on graph for larger image.

This graph shows the Remodeling Index since January 2008 on a seasonally adjusted basis.

This index has generally been trending up, but was down in December even with all the repairs in the Northeast. Note: Permits are not adjusted by value, so this doesn't indicate the value of remodeling activity. Also some smaller remodeling projects are done without permits and the index will miss that activity.

by Calculated Risk on 2/18/2013 09:15:00 PM

A couple of interesting stories ...

First, the prices for West Texas Intermediate (WTI) and Brent crude oil have diverged in recent years due to pipeline capacity issues. Jim Hamilton discusses the plans to build more pipelines: Planned crude oil pipelines. A pretty impressive amount of capaticy will be built over the next couple of years (See Hamilton's post).

And on California from the WaPo: Will higher taxes on the rich derail California’s economic comeback?

The tax increases approved in November are a big reason the state isn’t staring down another huge budget shortfall or the prospect of issuing IOUs to fill it. They include bumping the sales tax up slightly and raising the top income tax rate to 13.3 percent, which is four percentage points higher than the District of Columbia’s and more than double the rate in Virginia or Maryland.

Yet many economists and some young executives in the state say they don’t worry about that high rate chilling growth. Other factors loom much larger for California’s business and economic health, they say, including whether the state can maintain deep pools of highly skilled talent and, in complicated but important ways, the renewed upward march of home prices in the Bay Area and beyond.

“I don’t think we should be surprised that the state is growing, nor that California is growing faster than the national economy,” said Christopher Thornberg, an economist and the founding partner of Beacon Economics.
...
“The evidence is, from past tax increases, that it makes very little difference,” said Jerry Nickelsburg, a senior economist at the UCLA Anderson Forecast, who predicts only a slight scrape to state growth from the new rate increases. Since 1967, he added, tax hikes and cuts in the state have had a “second-order effect” on growth.

The bigger threat, other economists say, might be another run-up of housing prices, especially where the innovators live.

Housing prices are a much bigger factor in most people’s budgets than state tax rates, said Jed Kolko, chief economist for the online real estate site Trulia. If home prices rise quickly, he said, they constrain growth more than taxes do: “The skilled workforce that California presents as an advantage,” Kolko said, “is also threatened by higher housing prices.”

Tuesday economic releases:
• At 10:00 AM ET, the February NAHB homebuilder survey. The consensus is for a reading of 48, up from 47 in January. Although this index has been increasing sharply, any number below 50 still indicates that more builders view sales conditions as poor than good.

by Calculated Risk on 2/18/2013 06:17:00 PM

From economist Tom Lawler:

While several MLS that I follow have been unusually late in releasing their monthly reports, based on the reports that I have seen I estimate that US existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of about 5.10 million in January, up about 3.2% from December’s seasonally-adjusted pace, and up 10.2% from last January’s seasonally-adjusted pace. January, of course, is seasonally by far the weakest month of the year for closed home sales, with the January “seasonal” factor (for total existing home sales) typically averaging about 67.5% (depending on the year’s calendar). The seasonal factor for a “neutral” month is, of course, 100%.

On the inventory front, my “best guess” is that the NAR’s existing home inventory estimate for January will be unchanged from December’s estimate.

CR Note: The NAR will report January existing home sales on Thursday, February 21st. The consensus is the NAR will report sales of 4.90 million on a seasonally adjusted annual rate (SAAR) basis.

Based on Lawler's estimates, the NAR will report inventory at around 1.82 million units for January (same as December), and months-of-supply around 4.3 months (down from 4.4 months in December).   This would be the lowest months-of-supply since May 2005.

by Calculated Risk on 2/18/2013 04:21:00 PM

One of key questions for 2013 is Will Housing inventory bottom this year?. Since this is a very important question, I'll be tracking inventory weekly for the next few months.

If inventory does bottom, we probably will not know for sure until late in the year. In normal times, there is a clear seasonal pattern for inventory, with the low point for inventory in late December or early January, and then peaking in mid-to-late summer.

The NAR data is monthly and released with a lag.  However Ben at Housing Tracker (Department of Numbers) kindly sent me some weekly inventory data for the last several years. This is displayed on the graph below as a percentage change from the first week of the year.

In 2010 (blue), inventory followed the normal seasonal pattern, however in 2011 and 2012, there was only a small increase in inventory early in the year, followed by a sharp decline for the rest of the year.

So far - through mid-February - it appears inventory is increasing at a sluggish rate.

Click on graph for larger image.

Note: the data is a little weird for early 2011 (spikes down briefly).

The key will be to see how much inventory increases over the next few months. In 2010, inventory was up 8% by early March, and up 15% by the end of March.

For 2011 and 2012, inventory only increased about 5% at the peak.

So far in 2013, inventory is up 2.2%.   If inventory doesn't increase soon, then the bottom for inventory might not be until 2014.

by Calculated Risk on 2/18/2013 12:23:00 PM

Some interesting data from FNC: Foreclosure price discounts drop to pre-crisis levels

Though home foreclosures continue to be a challenge in many hard-hit markets, a report released this week by mortgage technology company FNC indicates the ongoing housing recovery should continue for the long haul.

According to FNC’s Foreclosure Market Report, foreclosure prices have bottomed out in recent months and the foreclosure market has stabilized while underlying home values are rising. Foreclosure prices are at a 10-year low (when the sizes of foreclosed homes are factored in).

This trend of a rising underlying market accompanied by stabilizing foreclosure prices is the first encouraging development in the housing recession, according to FNC Senior Research Economist, Dr. Yanling Mayer.

“The fact that we are seeing a combination of rising home prices and a bottoming out of foreclosure prices is a very good sign the housing recovery is taking hold,” Mayer said. “This is the very first time in the long housing recession that the two are happening at the same time.”

Click on graph for larger image.

More from FNC:

FNC’s report shows that foreclosure price discounts, which compare a foreclosed home’s estimated market value to its final sales price, have dropped to pre-mortgage crisis levels at about 12.2% in Q4 2012. At the height of the mortgage crisis in 2008 and 2009, foreclosed homes were typically sold at more than 25% below their estimated market value. Additionally, the report indicates that the typical size of foreclosed homes is also approaching pre-crisis levels.

“If you look at the period of short-lived recovery under the first-time homebuyer tax credits, the foreclosure market was still in the midst of rapid deterioration with the influx of delinquent mortgages,” Mayer said. “This time, we are witnessing an entirely different development in the foreclosure market.”

Another sign that the housing market is recovering (although the percent of distressed sales - foreclosures and short sales - is still very high).