“I think for the short term the people who have the cash will have the advantage. Over the longer haul, I think it will even out. I think the recovery is uneven,” says Howard.

(Read More: Is Multi-Family HomeConstruction Overheating?)

The first builder to report Monday is Virginia-based NVR, with Ryland, Pulte and D.R. Horton continuing through the week. Analysts say Texas-based D.R. Horton, whose stock has recently outperformed its peers, is the one to watch, a bell weather for the group.

“They are the largest builder in terms of the number of closings, and they are in the most markets, so they will probably be able to tell us not only about orders, but also about other things that are important to folks now, like what are material prices doing, how are you negotiating with suppliers,” notes Megan McGrath, an analyst at MKM Partners.

Most of the big builders have seen dramatic growth in new orders, as first time home buyers slowly come back to the market. These buyers are facing stiff competition from all-cash investors in the existing home market, and are therefore looking to new builds. D.R. Horton is an entry-level builder, but has been able to shift product to move-up buyers when the demand is there. Move-up buyers have been moving out of the market of late, despite the overall housing recovery and rising values.

“I think the recovery we’re seeing right now is first-time buyer and the very high end of the market. The move-up buyer has not really shown up as of yet, and if you want to see a very strong recovery in housing we need to see the move-up buyer playing a more prominent role than they are today,” says Richard Smith, Chairman and CEO of Realogy Holdings Corp.

Monthly readings on new and existing home sales are also out next week and will offer more insights into the current strengths and weaknesses of the housing recovery in this crucial Spring season.

(Read More: What’s Holding Up City Home Prices? Boomers)

“In a worst-case scenario, confidence could weaken further and housing starts could mark time,” says Paul Diggle of Capital Economics. “But by far and away the most likely outcome is that the construction industry’s growing pains are overcome and homebuilders break ground on many more sites over the next few years.”

Article source: http://www.cnbc.com/id/100656470

Inventories are tightest on the low end of the market, where investors came in and bought most of the distressed properties and are now holding them as single-family rentals. There is about a four-month supply of homes priced under $100,000, while there is around a twelve-month supply of homes priced over $500,000. That’s why sales of those low-end homes are down 16 percent from a year ago, and sales of higher-end homes are up 25 percent, according to the Realtors.

(Read More: Housing’s Big Challenge: Student Debt)

“The housing shortage is going to continue,” claimed Yun, who says the builders need to ramp up housing starts by 50 percent. He admits that is unlikely to happen due to land, labor and supply constraints.

Weak supplies are pushing home prices up far faster than wage growth, which is keeping first-time buyers especially on the sidelines. These buyers made up just 30 percent of the market in March, compared to the historical norm of 40-45 percent. They just can’t compete with all cash investors.

(Read More: Why Housing Affordability Is at Risk)

But if prices get too high, investors could leave the market. Their share was already down in March to 19 percent compared to 22 percent just one month ago. The danger is that they will start to unload the homes they own, which would bring much-needed supply back but which could also turn home prices in the other direction.

Article source: http://www.cnbc.com/id/100660999

“Despite multi-billion dollar buying sprees by well-funded Wall Street hedge funds, real estate investors bought fewer properties in 2012 than they did in 2011, which was a record year for investors. Investment-home sales declined 2.1 percent to 1.21 million from 1.23 million in 2011, but those sales had been well under a million during the market downturn,” according to a new survey from the National Association of Realtors.

Meanwhile, previously surging single family rents are flattening. Nearly 4 million more single-family homes have been added to the rental market since 2005, according to Trulia.com. Supply has finally caught up with demand, with single family rents up just 0.1 percent in March from a year ago. That has housing bears roaring again.

(Read More: Deep Freeze: Home Sales Barely Budge in Spring)

“In Phoenix—like Las Vegas, Florida, the Inland Empire, Central Valley et al—we now have a rental supply glut,” said Mark Hanson, a California-based housing and mortgage analyst.

“Wherever the institutional money has gone in and ravaged is high risk for housing investment or building. These regions have become highly volatile speculative regions in which prices can rise 20 percent one year and fall 15 percent the next. The insti’s have turned these markets into something I have never seen before…more like high-beta, speculative, volatile tech stock markets than housing markets.”

Prices are soaring in these markets because all-cash investors are finding very little left to buy. Regular buyers can’t compete with investors, so they are heading to the home builders. The builders were caught off guard, because they did not foresee this dynamic. Now they are rushing back to meet demand, while having no idea how long that demand will last. Why? Because when home prices get high enough, investors could cash out, pushing inventories higher and prices lower.

The birth of the new asset class, the REO (bank owned foreclosures) to Rent model, put a floor on home prices and reduced distress dramatically in the market. It also, however, added a new volatility to housing for years to come.

If investors hold and rent the homes, recovery will continue apace, but if sentiment shifts, and investors see bigger returns in sales than rents, the game could turn quickly.

RealtyCheck producer Stephanie Dhue contributed to this report.

—By CNBC’s Diana Olick; Follow her on Twitter @Diana_Olick or on Facebook at facebook.com/DianaOlickCNBC

Questions? Comments? RealtyCheck@cnbc.com

Article source: http://www.cnbc.com/id/100627586

“Rapid price appreciation is not good news for home buyers,” said Lawrence Yun, chief economist for the NAR. “Wages are up just 2-3 percent, while prices are rising 4-5 times that.”

(Read More: Home Resales Hit 3-Year High but Miss Forecasts)

With the increase in supplies came a return of all-cash investors, who had been moving out of the market, causing sales of homes on the low end to plummet. Investors made up 22 percent of home buyers in February, according to the Realtors, up from 19 percent in January. All-cash sales hit 32 percent, up from 28 percent, and distressed home sales also increased to 25 percent of all sales, from 23 percent.

Low inventory has kept first-time home buyers, who largely seek lower-priced homes, out of the market. Newlyweds Brian and Ali Earle have been looking for a home in Northern Virginia for almost a year.

“There’s not a lot out there,” Brian said. “It’s actually amazing. We see houses go under contract in a day or two, and so we really have to be on top of the game and be willing to drop everything and run and go check out a house, or it’ll be gone.”

Article source: http://www.cnbc.com/id/100577800

Developers are rushing to increase supply of multi-family apartments, as there are now more This even as single-family rentals continue to gain market share. Continued uncertainty in the housing market, tighter mortgage underwriting and weaker consumer wealth has pushed ever more Americans to rent; the foreclosure crisis forced others.

The boom in multi-family is already raising red flags.

“We are incrementally more cautious on the multi-family sub-sector, as we see a rising supply environment in 2014,” note analysts at Cantor Fitzgerald. “Although at this point, data indicate demand remains strong and absorption in check.

(Read More: One Overlooked Fact About the Housing Recovery)

Apartment demand increased “noticeably” in the fourth quarter of 2012, according to Reis Inc. This despite record-low mortgage rates and renewed faith in the housing market. Rents continued to rise, although at a slower pace than the previous quarter. They still managed to hit another all-time high, “propelled by strong demand, limited new supply growth, and a still weak for-sale housing market.”

The single-family housing market is rebounding off its historic lows, but the very limited supply of homes for sale gives cause for concern.

Low inventories are pushing prices higher, faster than expected. All-cash investors are pushing those gains, and in turn pushing out first-time home buyers. While non-investors are slowly moving back into the market, they are not arriving in the necessary numbers, and they are also not finding much to choose from.

(Read More: Home Builder Confidence Stalls)

Article source: http://www.cnbc.com/id/100388194

This represents just about one third of all homeowners nationwide, according to a new report from Zillow, a real estate information, sales and mortgage website.

Demographics, home prices and geographical location all seem to play into “free-and-clear” home ownership, according to Zillow’s survey.

Out of the nation’s top 30 housing markets, Pittsburgh, Tampa, New York, Cleveland and Miami had the highest percentage of free-and-clear homeowners. A high number of all-cash, foreign buyers probably plays into New York and Miami. The other cities have relatively low home values, compared to the rest of the nation, making it easier for homeowners to either buy their homes outright or pay off their mortgages more quickly.

Washington, D.C., Atlanta, Las Vegas, Denver and Charlotte had the lowest percentage of homeowners with no mortgage. Las Vegas, hard hit by the housing crash, saw many of its homes go to foreclosure and those homes then go to all-cash investors. (Read More: Banks Pay Big for Robo-Signing…Again.)

Article source: http://www.cnbc.com/id/100370046

“As a result, refinance applications dropped sharply to the lowest level in over a month.”

Applications to buy a home also dropped 5 percent week-to-week, indicating a still weak and rate-sensitive purchase market. One third of buyers in today’s housing market use all-cash. Many in the housing industry complain that it is not the rates but the availability of potential borrowers to obtain financing that is holding the market back from a more robust recovery.

The chairman of the National Association of Home builders says that while his cohort is feeling more confident about their business, “overly stringent lending standards” are holding back a more robust recovery.

(Read More: Housing Starts Fall as Sandy Slows Northeast)

Mortgage rates have been below 4 percent since May of 2012 and refinance volume has surged accordingly. Those refinances, many of them under the government’s Home Affordable Refinance Program (HARP) for underwater borrowers, have helped to fuel consumer spending and have likely kept many borrowers from defaulting on their loans.

The big drop in refinances after such a small move up in rates indicates that the slightest move, up or down, can really change activity. The hope, of course, had been for rates to continue moving down.

“A lot of money has been spent between OT [Operation Twist] and QE3 for very little incremental reward,” notes Peter Boockvar of Miller Tabak. “The true cost, yet to be determined, will of course occur when the likely market forced exit begins.”

If mortgage rates rise markedly in 2013, the housing recovery will undoubtedly take a hit. The recovery in housing began with all-cash investors, but owner-occupants are quickly moving in.

“Fannie Mae, Freddie Mac and the FHA financed a record $31.2 billion in so-called conforming jumbo mortgages during the third quarter of 2012,” according to a new Inside Mortgage Finance ranking and analysis. “Business in conforming jumbo loans – defined as mortgages on one-unit properties that exceed $417,000 – rose 29.6 percent from the second quarter and represented the highest quarterly volume for the agencies since emergency loan limits went into effect back in 2008.”

Unfortunately many buyers are either too young or too forgetful to realize that mortgage rates are incredibly, historically low, despite slight moves up week-to-week. The good news is in the near term is that when some buyers see rates tick up, they jump into purchase more quickly, for fear the rates will keep going up.

Article source: http://www.cnbc.com/id/100327898

(Read more: Jobs Report Shows Some Gains.)

When you dig down into the numbers, however, you can see where the numbers are not quite as rosy as some would hope for both home buyers and builders.

While overall construction added 17,000 jobs in October, residential-building construction employment fell by 2,000. Residential specialty contractor jobs increased by 6,700, which speaks to the real root of today’s housing recovery.

All-cash investors are leading the gains; they buy distressed properties and then repair and remodel them to turn them into rentals. It’s no wonder remodelers are seeing greater gains than the home builders.

An industry index of remodeling finally climbed into the positive in October, making a significant jump to its highest level since the end of 2005. Both current conditions and future expectations saw gains on the National Association of Home Builders’ remodeling index (RMI). The builders claim it is not just investors, but a result of rising home equity.

(Read More: Homeowners Hit by Sandy May Save Thousands of Dollars)

“The strength of the RMI, especially in owner-occupied properties, shows that home owners are investing in remodels as home prices stabilize,” said NAHB Remodelers Chairman George Moore Jr., a remodeler from Elm Grove, La. “As owners become more confident that investments in housing will hold their value, they are beginning to undertake projects to improve their comfort that they had been putting off.”

While any construction is better than no construction, housing analysts focus more on home building than remodeling, as the nation’s home builders contribute more to the overall economy, with more jobs and materials. Home builders have ramped up production dramatically, as they rise from the ashes of the housing bust.

Housing starts and permits are up significantly from the bottom, and the public builders are all reporting at least double-digit gains in new orders.

They still, however, need to see more demand from their historically strong cohort, the first-time home buyer. Those younger Americans are seeing employment gains, but are still proportionally harder-hit than the rest of the work force.

(Read More: Home Prices Rise, but Analysts See Pressure Ahead)

“Among 25-34 year-olds, the prime age group for housing demand, 75.1 percent were employed in October, up from 74.9 percent in September and from 73.6 percent in October 2011,”" notes Jed Kolko of Trulia.com, a real estate sales and information website. “For this age group, the unemployment rate was 8.3 percent in October, down from 9.7 percent one year ago – an even bigger drop than for the economy overall. Labor force participation increased for this key group.”

The downside in October’s jobs report, however is that job growth in what Kolko calls “clobbered metros” was just 0.5 percent (annualized rate) through September – behind the national average of 1.6 percent for the same period. (These figures are annualized 3-month growth rates to September, the latest data released for metros.) Kolko defines clobbered metros as the areas with the biggest price declines during the bust and the highest vacancy rates now: “Job growth there is especially important for housing demand,” he notes.

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US Home Builders

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