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Builders are on track to construct the fewest single family homes in history this year. Total housing starts in July were down 1.7 percent, month to month, which may not sound like a lot, but when you break the number down, you see the problem.

Single family starts were down 4.9 percent, while multifamily starts rose 6.3 percent. Rental demand continues to rise, as consumer confidence in homeownership was decimated yet again by the recent debt turmoil in the economy.

I am reporting these numbers from a construction site. Mid-Atlantic Builders of Rockville, Md., is putting up the last phase of a large single-family development out in Bowie, Md., which is about 15 minutes outside the D.C. Beltway. They are a midsized builder, about 40 to 50 homes a year, which is about a third of the business they did just five years ago.

They are now smaller, leaner, but surviving thanks to their location near D.C., where unemployment is low, relative to the rest of the country. Business was even starting to pick up last winter, according to executive vice president Stephen Paul.

“We started what we call the spring market in February. We started out very strong, we had a good February, March, even into April,” he said. “What started to cause consumer confidence to wane was the escalation of gas prices, the debt issue with the government, and what’s going on in Europe.”

In other words: Confidence.

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Article source: http://www.cnbc.com/id/44162436?__source=RSS*blog*&par=RSS

Builders are on track to construct the fewest single family homes in history this year. Total housing starts in July were down 1.7 percent, month to month, which may not sound like a lot, but when you break the number down, you see the problem.

Single family starts were down 4.9 percent, while Multi-family starts rose 6.3 percent. Rental demand continues to rise, as consumer confidence in homeownership was decimated yet again by the recent debt turmoil in the economy.

I am reporting these numbers today from a construction site. Mid-Atlantic Builders of Rockville, MD is putting up the last phase of a large single family development out in Bowie, MD, which is about 15 minutes outside the DC Beltway. They are a mid-sized builder, about 40 to 50 homes a year, which is about a third of the business they did just five years ago.

They are now smaller, leaner, but surviving thanks to their location near DC, where unemployment is low, relative to the rest of the country. Business was even starting to pick up last winter, according to executive VP Stephen Paul.

“We started what we call the spring market in February. We started out very strong, we had a good February, March, even into April. What started to cause consumer confidence to wane was the escalation of gas prices, the debt issue with the government, and what’s going on in Europe.”

In other words: Confidence.

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What does the consumer price index (CPI) have to tell us about the future of the housing market?

Apparently a lot.

Let me first explain a few things for those of you housing types who don’t follow this monthly number. The CPI is the most common way to measure inflation. There’s the big number and then what’s called the “core” number, which is the big number minus food and energy costs (gas prices obviously skewing things a lot these days). The big number was pushed down thanks to a drop in gasoline prices, but the core number was higher than expected, thanks to housing.

One component of the CPI is the “Owners Equivalent Rent,” (OER) measures the amount of money it costs to live somewhere, anywhere, be it a rental apartment or your own home.

“The key factor in the higher than expected core rate was a .2 percent rise in Owners Equivalent Rent, the biggest gain since March ’09,” writes Peter Boockvar of Miller Tabak. “This figure is important because it makes up 25 percent of CPI and 40 percent of the core. Apartment landlords are gaining pricing power as vacancies fall as the homeownership continues its decline. This is a secular trend and will result in a further lift in core inflation going forward.”

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Let me preface with an apology for the huge supply of numbers in this post, but if you can make it through them all, I think you will get the picture I’m drawing here.

The so-called “shadow inventory” of residential properties is falling, according to a new report from CoreLogic.

This is the number of homes with seriously delinquent loans (90+ days), loans in the foreclosure process and bank-owned homes which are not yet listed for sale.

The supply as of April 2011 declined to 1.7 million units, representing a five months’ supply. This is down from 1.9 million units, also a five months’ supply, from a year ago.

“The decline was due to fewer new delinquencies and the high level of distressed sales, which helped reduce the number of outstanding distressed loans,” according to the report.

Good news, no? Wait. There’s more:

“In addition to the current shadow inventory, there are 2 million current negative equity loans that are more than 50 percent or $150,000 “upside down.” These current but underwater loans have increased risk of entering the shadow inventory if the owners’ ability to pay is impaired while significantly underwater.”

And then there’s this other report from Lender Processing Services (LPS), which also reports a drop in newly delinquent loans, but gives the actual, mind-numbing numbers of loans in trouble:

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You probably don’t think of unrest in the far away Middle East as having anything to do with the housing market here in the U.S. You should.

The weekly mortgage applications say it all.

Despite the rate on the 30-year fixed falling below the psychologically important 5 percent line, mortgage applications to purchase a new home and to refinance both dropped; yes, there was a holiday involved, but the four week moving average is also down, despite mortgage rates coming off their Egypt-unrest surge.

Remember, rates track yields on the 10-year Treasury, which have been volatile due to the unrest abroad, but not THAT volatile: Less than half a percentage point.

Rates are one thing, but uncertainty weighs heavier on potential buyers, and rising oil prices may outweigh both.

“It’s the spring season. This is where new home buyers come out looking to buy a home,” says FBR’s Paul Miller. “If gas prices have gone up significantly, it’s going to cut into the foot traffic, and we’re really concerned with what that’s going to do to housing market.”

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