Housing Roundup


Lots of interesting news on housing over the past couple of days. In the interest of finding the lazy way to review all of it, here’s a compendium with some thoughts.

First, Donald Marron has an interesting way of looking at new construction. You probably noted that new housing starts were reported earlier this week to have risen by more than 10% in March. On its face, not a bad print but this stat is notoriously volatile. Marron suggests looking not only at this number but also at the number of homes under construction.

When you do that you get this chart:

new homes under-construction-april-2010

Marron’s chart is useful since it takes into account starts, houses under construction and naturally completed homes fall out of the equation. His numbers indicate that new construction after falling off a cliff has stabilized somewhere a bit north of 300,000 units. It isn’t growing all that much but at least it isn’t dropping like a stone. It also serves to take a bit of the hype out of the monthly starts number.

The Mortgage Bankers Association was out with its report for the first quarter and basically was having trouble reconciling the seasonally and non-seasonally adjusted numbers.

The delinquency rate for mortgage loans on one-to-four-unit residential properties increased to a seasonally adjusted rate of 10.06 percent of all loans outstanding as of the end of the first quarter of 2010, an increase of 59 basis points from the fourth quarter of 2009, and up 94 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate decreased 106 basis points from 10.44 percent in the fourth quarter of 2009 to 9.38 percent this quarter.

The percentage of loans on which foreclosure actions were started during the first quarter was 1.23 percent, up three basis points from last quarter but down 14 basis points from one year ago.

The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure.  The percentage of loans in the foreclosure process at the end of the first quarter was 4.63 percent, an increase of five basis points from the fourth quarter of 2009 and 78 basis points from one year ago. This represents another record high.

The combined percentage of loans in foreclosure or at least one payment past due was 14.01 percent on a non-seasonally adjusted basis, a decline from 15.02 percent last quarter.

The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 9.54 percent, a decrease of 13 basis points from last quarter, but an increase of 230 basis points from the first quarter of last year.

I’ll leave it to you to satisfy your curiosity regarding their problems with reconciling the data. Suffice it to say that there may be some slight improvement in the trends with regard to the overall problem but it’s hard to interpret from the data. The bigger message is that there is still a monumental problem with delinquent loans and foreclosures that will likely take years to work through.

The big news of the day from the MBA which shouldn’t shock anyone is that applications for mortgages to purchase homes fell off a cliff.

“Purchase applications plummeted 27 percent last week and have declined almost 20 percent over the past month, despite relatively low interest rates.  The data continue to suggest that the tax credit pulled sales into April at the expense of the remainder of the spring buying season.  In fact, this drop occurred even as rates on 30-year fixed-rate mortgages continued to fall, and at 4.83 percent are at their lowest level since November 2009,” said Michael Fratantoni, MBA’s Vice President of Research and Economics.  “However, refinance borrowers did react to these lower rates, with refi applications up almost 15 percent, hitting their highest level in nine weeks.”

I know that most of you are SHOCKED by this turn of events. Who would have forecast that the end of the homebuyer tax credit would result in a decline in purchase activity. Who would have guessed that withdrawing a subsidy would produce these sorts of results. Please, please do not call your Congressman and ask him to look into this.

Finally, via Clusterstock, a survey of “housing experts” by Robert Shiller indicates that home prices are set to start moving up smartly once more.

Madison, NJ, May 19, 2010 – Today MacroMarkets LLC announced that, according to its new monthly survey, the onset of price recovery in U.S. single family real estate is widely expected by 2011, and home prices will increase by more than 12.4% between 2010 and the end of 2014.  The survey also revealed that home prices nationwide are expected to have risen 4.9% in the 12-month period ended March 2010, but fallen 0.4% during the most recent quarterly period measured1.  These conclusions reflect an average of the 92 responses received during the first half of this month from an expert panel of more than one hundred economists, housing analysts, investment and market strategists.

That’s pretty bold stuff given the uncertainty about the future shape of mortgage finance and the economy in general. Nevertheless, I can buy into the thesis that residential real estate could experience a better than expected rebound, at least to a limited extent. If the smaller investor continues to shun the stock market, there savings have to go somewhere and it’s not unreasonable that some of it will make its way into housing. We’ve already seen this as investor purchases have been one of the support legs for housing. I think that the desire to be able to see, touch and own your investment is pretty real and that is likely to continue to bring money into housing, particularly on the investment side.

So there you have it, some relatively awful news along with a little bit of sugar for you few remaining housing bulls. To be fair, you have to still describe the residential real estate market as if not critical, then at least one bad episode away from readmittance to critical care.

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