by Calculated Risk on 4/25/2011 11:12:00 PM

From Dina ElBoghdady at the WaPo: Affordable rental housing scarce in U.S., study finds

The share of renters who spend more than half their income on housing is at its highest level in half a century and it’s no longer just low-income tenants who are feeling the pain, according to a Harvard University study scheduled for release Tuesday.

About 26 percent of renters — or 10.1 million people — spent more than half their pre-tax household income on rent and utilities in 2009.
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Developers cut back on such projects when the economy deteriorated in 2009, which drove down vacancies and boosted rents.
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In many areas, the demand is driven by families who lost their homes to foreclosure ... [and] as the job market recovers, more newly employed young adults appear to be seeking their own apartments instead of living with their parents, putting even more upward pressure on rental rates ...

This is a very high percentage of their income for housing. Add in higher gasoline prices, and there can't be much left.

Recent reports have shown the apartment vacancy rate is falling rapidly - and rents are rising - so this situation is probably even worse now than in 2009. Note: The Census Bureau's Q1 Housing Vacancies and Homeownership report will be released Wednesday and includes the rental vacancy rate for Q1.

Home sales for March:
• New Home Sales in March at 300 Thousand SAAR, Record low for March
• Home Sales: Distressing Gap
• New Home Sales and Inventory Graphs
• Existing Home Sales and Inventory Graphs

by Calculated Risk on 4/25/2011 08:03:00 PM

David Streitfeld at the NY Times quoted Jennifer Lee, senior economist at BMO Capital Markets today regarding the new home sales report:

"Sales remain very low by historical standards and, considering that a number of home builders reported large drops in orders recently, there is likely more weakness ahead."

I agree with Lee that there is more weakness ahead, however the recent "large drop in orders" for homebuiders was for Q1, and the Census Bureau report today was for March - so this report tells us about last quarter, not the future for homebuilders (just a few homebuilders have reported - many more will report this week).

According to the Census Bureau, this was the weakest Q1 on record with only 71,000 homes sold, so it is no surprise the homebuilders are reporting a weak first quarter. (Note: record keeping started in 1963). The previous record low was 84,000 in Q1 2009 (also there were 87,000 home sold in Q1 2010).

A key difference between the quarterly homebuilder reports, and the monthly Census Bureau report, is that the homebuilders report net new sales (net of cancellations), and the Census Bureau ignores cancellations (this works out over time). It appears cancellations ticked up in Q1, although nothing like during the worst of the housing bust, and that means the Census Bureau probably over estimated sales in Q1.

Here is a short discussion on cancellations from the Census Bureau.

As a result of our methodology, if conditions are worsening in the marketplace and cancellations are high, sales would be temporarily overestimated.

It would be great if the Census Bureau reported net sales so we could compare to the homebuilder's reports. Oh well ...

Home sales for March:
• New Home Sales in March at 300 Thousand SAAR, Record low for March
• Home Sales: Distressing Gap
• New Home Sales and Inventory Graphs
• Existing Home Sales and Inventory Graphs

by Calculated Risk on 4/25/2011 03:21:00 PM

Earlier from the Dallas Fed: Texas Manufacturing Activity Increases but at a Slower Pace

Texas factory activity continued to expand in April, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, moved down from 24 to 8, suggesting slower growth in output.
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The new orders index was positive for the sixth consecutive month, although it decreased from 14 to 4 in April. ... The employment index edged up from 12 to 13, its highest reading this year. ... Hours worked were essentially flat in April after increasing for five consecutive months.

There are two more regional Fed surveys to be released this week (The Dallas survey is D-list data at best). These regional surveys do provide a hint about the ISM manufacturing index to be released next Monday, May 2nd, and I'll post a graph on Thursday after the other regional surveys are released.

by Calculated Risk on 4/25/2011 12:15:00 PM

Another update ... this graph shows existing home sales (left axis) and new home sales (right axis) through March. 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.

Notes:
1) 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.

2) 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 "distressing gap" will remain.

by Calculated Risk on 4/25/2011 10:00:00 AM

The Census Bureau reports New Home Sales in March were at a seasonally adjusted annual rate (SAAR) of 300 thousand. This was up from a revised 270 thousand in February.

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 March 2011 were at a seasonally adjusted annual rate of 300,000 ... This is 11.1 percent (±21.7%)* above the revised February rate of 270,000, but is 21.9 percent (±10.3%) below the March 2010 estimate of 384,000.

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

Months of supply decreased to 7.3 in March from 8.2 months in February. The all time record was 12.1 months of supply in January 2009. This is still higher than normal (less than 6 months supply is normal).

The seasonally adjusted estimate of new houses for sale at the end of March was 183,000. This represents a supply of 7.3 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 73,000 units in March. 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 March 2011 (red column), 29 thousand new homes were sold (NSA). This is a new record low for the month of March.

The previous record low for March was 31 thousand in 2009. The high was 127 thousand in 2005.

Although slightly above the consensus forecast, this was a record low for March - and new home sales have averaged only 295 thousand SAAR over the last 11 months.

by Calculated Risk on 4/25/2011 08:39:00 AM

From Campbell/Inside Mortgage Finance HousingPulse: HousingPulse Distressed Property Index Rises for Month; Homebuyer Traffic Flattens

The HousingPulse Distressed Property Index (DPI), a key indicator of the health of the U.S. housing market, rose to 48.6 percent in March – the second highest level seen in the past 12 months.
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The HousingPulse DTI indicated that nearly half of the housing market is now distressed properties. This trend is likely to continue as a backlog of foreclosures and mortgage defaults make their way through the housing pipeline.
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Survey respondents reported mixed opinions on traffic for the winter and spring housing market. “January, February and March sales were characterized by a wait and see attitude of buyers.
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[S]hort sales boomed in the month of March and the proportion of damaged REO fell. Short sales rose from 17.0% in February to a record-high 19.6% in March. Damaged REO fell from 14.9% in February to 12.0% in March.

This fits with other data showing a high level of distressed properties, and this suggests further declines in the repeat transaction house price indexes.