“This reflects a characteristically volatile multi-family sector rather than renewed weakness, and we expect homebuilding volumes to rise further later this year,” wrote Paul Diggle of Capital Economics.

Housing starts fell 9.8 percent, but the drop was entirely in apartment construction, which accounts for 30 percent of all residential construction activity, according to the U.S. Commerce Department. Multi-family starts fell by 26.2 percent in June compared to May. Single family housing starts fell by just 0.8 percent month-to-month.

(Read More: Map: Tracking the US Real Estate Recovery)

“Should we be concerned? Not yet,” wrote Patrick Newport of IHS Global Insight. “Builders are still not putting up enough homes. Far from it. By our estimate, underlying demand is running close to 1.4 million. Meanwhile, housing completions in July were 755,000 [annual rate], while housing permits were 911,000.”

Article source: http://www.cnbc.com/id/100893375

“I think the higher stock market and low rates is a function of the Fed [Federal Reserve] just pumping liquidity into the system,” said Paul Miller of FBR. “What you see, I believe, is some of that liquidity is leaking into the stock market, which is resulting in higher valuations for stocks. But the bond market is still flush with liquidity, and that is keeping mortgage rates low.”

Should the Fed start winding down its asset purchases later this year, mortgage rates will rise. That would make home buying more expensive in an already rising price environment. But is that enough to stop housing’s momentum? Perhaps not.

(Read More: What’s Really Behind Home Price Gains)

“For mortgage payments to return to their long-term average of 22 percent of disposable income, 30-year fixed rates would have to rise all the way to 9 percent,” noted Paul Diggle of Capital Economics. “Accordingly, we’re optimistic that the nascent improvement in mortgage applications will be sustained.”

In any case, it hasn’t been the rates holding borrowers back, but the availability of mortgage credit. That may be easing as well.

Nearly 10 percent of senior loan officers surveyed by the Federal Reserve in April reported easing their lending standards for low-risk mortgages. That’s an increase from the previous quarter. Banks were not, however, more willing to lend to borrowers with lower credit scores. This as 44 percent of loan officers surveyed reported demand for “prime” mortgages was moderately stronger.

(Read More: Old Ills Still Hit Big Banks)

Article source: http://www.cnbc.com/id/100720364

“Market prices have to go higher to provide incentives for more new houses to be built,” said Aaron Edelheit, CEO of Atlanta-based The American Home, a company that invests in distressed properties and turns them into rentals. “I believe we are on the cusp of a massive housing shortage in many parts of the country due to the historic lack of residential investment in the last five years. This summer, I expect the housing market to be ‘blue flame’ hot.”

(Read More: What Tops Home Buyers’ Wish List Now)

Prices today are rising fast because supplies of homes for sale are so low. Both new and existing homes are running near four month supplies.

For new homes, builders just aren’t able to start fast enough, due to labor and land restraints.

For existing homes, there are fewer distressed properties for sale, a segment that has driven the market into recovery, and organic homeowners are either unwilling to list their homes for fear of selling at the bottom, or unable to list because they are still underwater on their mortgages.

(Read More: Foreclosures Fall Due to New Laws)

“Taking new and existing homes together, the relationship between the months’ supply of unsold homes and house prices points to an acceleration in the pace of house prices gains in the year ahead,” said Paul Diggle of Capital Economics.

Article source: http://www.cnbc.com/id/100496564

Renter household formation remains at the strongest level in decades. Roughly 1.32 million new renter households were formed in the past year (including owner conversions), while the number of owner-occupied households declined by 175,000. Resident turnover and move-outs to homeownership remain near historic lows for most operators. Incoming leasing traffic is more than offsetting move-outs while paying higher rates.

The home ownership rate declined yet again in the fourth quarter of 2012, according to a new report from the U.S. Census today. It now stands at 65.4 percent, down from 66 percent a year ago and from a high of 69.2 percent in 2004. If you include the 5.3 million borrowers who are delinquent on their mortgages or in the foreclosure process, per Lender Processing Services, the real home ownership rate is even lower.

“The fact that the housing recovery is being driven principally by investor demand means that the slight decline in the homeownership rate in the fourth quarter is unlikely to be the last,” notes Paul Diggle of Capital Economics.

(Read More: World’s Most Expensive City to Rent Is…)

There is also a tremendous amount of pent-up demand for the rental market, as nearly 23 million young adults, male and female, under age 35 (31 percent of the cohort) are currently classified as ‘living at home’ with parents, according to Raymond James’ analysis. As job growth improves, they will move to rental apartments; the homeownership rate for this group is only 34 percent.

(Read More: Rentals Chip Away at Home Builder Gains)

Investors are also concerned about a 49 percent jump in multi-family construction permits from a year ago, but those permits are still running well below normal levels, and every year about 150,000 units are removed from housing stock for various reasons, like age and damage.

Suffice it to say that the apartment sector and the multi-family REITs will likely see a surprise to the upside in 2013. Rents will still rise, despite housing affordability and growth in the single family market.

(Read More: Real-Estate Tips from a Mega-Broker to the Stars)

Article source: http://www.cnbc.com/id/100416547

Renter household formation remains at the strongest level in decades. Roughly 1.32 million new renter households were formed in the past year (including owner conversions), while the number of owner-occupied households declined by 175,000. Resident turnover and move-outs to homeownership remain near historic lows for most operators. Incoming leasing traffic is more than offsetting move-outs while paying higher rates.

The home ownership rate declined yet again in the fourth quarter of 2012, according to a new report from the U.S. Census today. It now stands at 65.4 percent, down from 66 percent a year ago and from a high of 69.2 percent in 2004. If you include the 5.3 million borrowers who are delinquent on their mortgages or in the foreclosure process, per Lender Processing Services, the real home ownership rate is even lower.

“The fact that the housing recovery is being driven principally by investor demand means that the slight decline in the homeownership rate in the fourth quarter is unlikely to be the last,” notes Paul Diggle of Capital Economics.

(Read More: World’s Most Expensive City to Rent Is…)

There is also a tremendous amount of pent-up demand for the rental market, as nearly 23 million young adults, male and female, under age 35 (31 percent of the cohort) are currently classified as ‘living at home’ with parents, according to Raymond James’ analysis. As job growth improves, they will move to rental apartments; the homeownership rate for this group is only 34 percent.

(Read More: Rentals Chip Away at Home Builder Gains)

Investors are also concerned about a 49 percent jump in multi-family construction permits from a year ago, but those permits are still running well below normal levels, and every year about 150,000 units are removed from housing stock for various reasons, like age and damage.

Suffice it to say that the apartment sector and the multi-family REITs will likely see a surprise to the upside in 2013. Rents will still rise, despite housing affordability and growth in the single family market.

(Read More: Real-Estate Tips from a Mega-Broker to the Stars)

Article source: http://www.cnbc.com/id/100416547

The shift in the sales mix is also largely due to a drop in the number of distressed homes for sale. Foreclosures and short sales made up just 22 percent of home sales in November, according to the Realtors, the lowest share in five years. Much of that is due to a lack of supply on the distressed side, as investors continue to compete for these properties to take advantage of the still-lucrative rental market.

The Realtors claim the distressed share of sales will continue to decline in 2013, due to fewer seriously delinquent loans, but banks are now ramping up foreclosures of long-delayed delinquent loans, so there could be another bump in that supply before it finally falls dramatically. Bank repossessionsjumped 11 percent month-to-month in November and saw the first annual increase since 2010, according to RealtyTrac.

Overall, the supply of all homes nationally is at its lowest level in 7 years,, just 4.8 months’ worth at the current sales pace.

(Read More: Best US HousingMarkets for Buyers and Sellers)

“With the homebuyer affordability index near multi-decade highs combined with decent job creation at the same time renting has gotten more expensive — all lead to a continued improvement in sales,” writes Peter Boockvar of Miller Tabak. “This said, sales are still 30 percent below the bubble highs and are still where they were in 1998, both pointing to the degree of possible improvement ahead but also evidence of the damage that was done where historically the pace of recovery takes time.”

(Read More: New Nightmare forHome Builders: Not Enough Skilled Workers)

Article source: http://www.cnbc.com/id/100331527

(Read More: Housing Recovery Is Leaving Behind First-Time Buyers)

Congress raised guarantee fees in 2011 to pay for a payroll tax cut. There is yet another plan to raise fees further to fund immigration reform, although the bill is widely expected to fail.

“Dipping back into the housing piggybank to pay for unrelated policy items on the backs of America’s homebuyers ends the wrong message at a time when the housing market is starting to show signs of recovery,” wrote David Stevens, President and CEO of the Mortgage Bankers Association in a statement last month.

(Read More: Big Money Is Making Big Bets on a Housing Rebound )

Raising guarantee fees is another way for government to wind down the two mortgage giants it still backs, Fannie Mae and Freddie Mac, but that comes at a cost to borrowers who are already hampered by stricter underwriting standards.

“G-fees will continue to increase as a way to run down the GSEs’ role in the mortgage market,” writes Paul Diggle of Capital Economics. “Stronger mortgage demand suggests that would-be buyers are growing in confidence. Nevertheless, mortgage lending will continue to be held back by tight credit.”

(Read More: Home Builders Beg for Skilled Workers)

Article source: http://www.cnbc.com/id/100301299

(Read More: Housing Recovery Is Leaving Behind First-Time Buyers)

But even outside those hot markets, this national housing recovery is dependent on investors, who are largely all-cash buyers. The mortgage market is still too restrictive to support the kind of bulk-buying that needs to occur, and many potential buyers either lack the credit scores or the confidence to jump in. Another 14 million borrowers still owe more on their mortgages than their homes are worth, according to Zillow, and are therefore unable to move.

(Read More: Foreclosure Discounts Drying Up)

Five million properties are either in the foreclosure process or their owners are delinquent on their mortgages. That means foreclosures will remain elevated for the foreseeable future, and investors will be necessary to absorb them. Another concern is that home prices are rising faster than income, which could push potential owner-occupants away just as they were starting to dip their toes in again.

(Read More: Yes, Housing Starts Surge, but Rentals Are the Drivers)

The risk of sales dropping as investors leave is obviously higher in the markets that saw the biggest drop in home prices during the crash, again, like Phoenix. Other markets, such as Chicago, Atlanta, and even parts of Florida, where prices are still weak and distress is still a large share of the market, are still seeing improved sales, as investors shift their sights and cash to more yield-worthy ground.

Sector Watch – U.S. Home Builders

• Toll Brothers
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• DR Horton
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• Hovnanian Enterprises
  [HOV 
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• PulteGroup
  [PHM 
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• Ryland Group
  [RYL 
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• Lennar Corp
  [LEN 
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• Beazer Homes USA
  [BZH 
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• Meritage Homes
  [MTH 
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• KB Home
  [KBH 
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Questions?  Comments?